The Experience Curve Concept

question 6

Multiple Choice

The experience curve concept:

• A)helps a company realize both learning effects and diseconomies of scale.
• B)suggests that unit manufacturing costs increase by a certain amount each time output is increased.
• C)is very important in industries that mass-produce a standardized output.
• D)suggests that achieving low costs allows a firm to charge a premium price.
• E)is least likely to bottom out as long as the company does not stop production.

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Definitions:

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since it was put into use, reducing its book value on the balance sheet.

Disposed

Refers to the act of selling, transferring, or getting rid of an asset or property owned by an individual or company.

Gain

The increase in value of an asset or decrease in liabilities resulting in an increase in owners' equity, except those relating to contributions from owners.

Fully Depreciated

The status of an asset whose entire cost has been expensed and has reached the end of its useful life according to accounting standards.