The ABC Company Manufactures Routers That Are Used to Provide

question 108

Multiple Choice

The ABC Company manufactures routers that are used to provide high-speed Internet service.ABC sells an average of 1,000 routers each month, but to exhaust economies of scale in its industry ABC would have to sell 3,000 routers each month.Therefore,

• A)ABC is experiencing diseconomies of scale.
• B)ABC is experiencing diminishing returns.
• C)to reach minimum efficient scale ABC would have to sell at least 3,000 routers each month.
• D)ABC will soon go out of business.

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Definitions:

Time Variance

The gap between the time actually needed to accomplish a task and the time that was anticipated for it.

Rate Variance

The difference between the expected rate of return on a project or investment and the actual rate achieved.

Total Direct Labor Cost Variance

The difference between the actual cost of direct labor used in production and the expected (or standard) cost.

Materials Price Variance

The difference between the actual cost of materials and the expected cost at standard prices, indicating how much was saved or overspent.