Economies of Scope Differ from Economies of Scale in That

question 27

Multiple Choice

Economies of scope differ from economies of scale in that

• A)scope stems directly from strategic fit along the value chains of related businesses,while scale refers to cost savings that accrue directly from larger-sized operations.
• B)scope refers to strategic fits to be gained outside the value chain,while scale refers to the impact of the value chain on operations.
• C)scope refers to the reach of defined savings within the value chain,while scale refers to the magnitude or size of the operation itself.
• D)scope refers to the possibilities of change,while scale refers to the extent and direction of change.
• E)they mean the same thing and the only difference is the extent of cost savings accrued from unrelated businesses in each.

---

Definitions:

Products

Products are items or services created through a process and made available for consumer purchase or use, serving identified market needs or desires.

Production Department

A unit or section within a company responsible for the actual production of goods or services.

Plantwide Factory Overhead Rates

These rates are applied uniformly across all production activities in a plant to allocate indirect costs to products.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor, such as maintenance, utilities, and equipment depreciation.