When a Firm Adopts a Strategy of Being a Low-Cost

question 55

True/False

When a firm adopts a strategy of being a low-cost producer and sells its products at a price lower than its competitors, the firm is said to be using a strategy of cost leadership.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or business activity, such as materials and labor.

Operating Income

Earnings before interest and taxes (EBIT), representing the amount of profit realized from a business's operations.

Fixed Costs

Expenses that do not change with the level of output or production, such as rent, salaries, and insurance.

Variable Costs

Expenses that fluctuate based on the amount of products or services a company generates.