COST ACCOUNTING
VARIABLE COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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firms spend money on new technology which leads to lower average costs.
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decision-making by management becomes more difficult in larger firms.
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workers are more likely to be productively efficient in larger firms.
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larger firms can buy in bulk.
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Detailed explanation-1: -Diseconomies of scale can occur for a variety of reasons, but the cause often comes from the difficulty of managing an increasingly large workforce. An overcrowding effect within an organization is often the leading cause of diseconomies of scale.
Detailed explanation-2: -Diseconomies of scale occur when a business grows so large that the costs per unit increase. As output rises, it is not inevitable that unit costs will fall. Sometimes a business can get too big! Diseconomies of scale occur for several reasons, but all as a result of the difficulties of managing a larger workforce.
Detailed explanation-3: -The main reason as to why the firm encounters diseconomies of scale are because the expansion of firms comes with additional costs such increase the number of employed staffs and administration costs among other costs.
Detailed explanation-4: -There are two main categories of diseconomies of scale: internal and external. While internal diseconomies of scale result from factors within the company’s control, external diseconomies of scale occur due to factors outside of a company’s influence.
Detailed explanation-5: -Problems With Diseconomies of Scale It reduces effective communication in a company or business. It creates a leg between operations and the level of outputs. It causes a decline in motivation of employees, this is because they feel they are not doing enough or are less-valued and thereby become demotivated.