COST ACCOUNTING
VARIABLE COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Diseconomies of scale
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Inefficient Scale
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Efficient Scale
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Economy of scale
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Detailed explanation-1: -In economics, the MES is the lowest production point that will minimize the long-run average total cost (LRATC). LRATC represents the average cost per unit of output over the long run. But remember, all inputs are variable. MES allows a company to achieve the lowest cost per unit until constant returns to scale begin.
Detailed explanation-2: -Efficient scale is the quantity that minimizes average total cost.
Detailed explanation-3: -The efficient scale of production is the quantity of output that minimizes the average total cost.
Detailed explanation-4: -At the quantity of output where average total cost is minimum, that’s where the efficient scale of production occurs.
Detailed explanation-5: -The efficient scale of the firm is the quantity of output that minimizes average total cost. Whenever marginal cost is less than average total cost, average total cost is falling.