Question

A cell phone manufacturing firm produced 1,000 cell phones a day but believed that it could reasonably top up production to 2,000 cell phones a day. Consequently, it built a larger plant and installed efficient machineries and work arrangements to realize the projected output. Which of the following can most likely be inferred from this information?
a. the unit cost of producing 2,000 cell phones per day would be twice that of the unit cost of producing 1,000 units per dayb. a production plant with the capacity of producing 5,000 cell phones a day would be most efficientc. the unit cost of producing 2,000 cell phones per day would be lower than the unit cost of producing 1,000 units per dayd. a 2,000-capacity production plant would be less efficient because of increasing diseconomies of scalee. the fixed costs of the firm are more likely to increase with the increase in output

Answer 1

Answer:

the unit cost of producing 2,000 cell phones per day would be lower than the unit cost of producing 1,000 units per day.

Explanation:

The costs of producing the 2000 units per day will be lower due to the following reason:

Economies of scale. The company will enjoy the benefits associated with large scale productions. When purchasing raw materials, the company will be a position to bargain for better discounts. The production cost is spread among finished products. A large production keeps the cost per item low.

Some fixed costs may not change. By adding a new plant, the company will increase production activities. Variable costs will increase, but some fixed costs are likely to remain the same. Administrative cost, top management salaries will not be affected. It means a larger number of finished used will absorb the fixed cost.

Efficient machines: The company has invested in new and more efficient machines. Efficiency implies the use of less labor, less power, and faster production. The result is a lower cost of production.