ENTREPRENEURIAL OPERATIONS
PRODUCTION PLANNING AND CONTROL
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which term shows the optimal amount of stock level that minimises a firm’s average cost of production?
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Buffer stock
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Economies of scale
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Economic order quantity
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Diseconomies of scale
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Explanation:
Detailed explanation-1: -The economic order quantity (EOQ) is a company’s optimal order quantity that meets demand while minimizing its total costs related to ordering, receiving, and holding inventory.
Detailed explanation-2: -Economies of scale happen when an increase in output quantity reduces the per unit total cost of production.
Detailed explanation-3: -In sum, economies of scale refers to a situation where long run average cost decreases as the firm’s output increases.
Detailed explanation-4: -Economies of scale are cost advantages reaped by companies when production becomes efficient. Companies can achieve economies of scale by increasing production and lowering costs.
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