Because a new business has grown considerably,it can now purchase larger quantities of a certain raw material. Purchasing in larger quantities allows the company to get a lower price per pound of the raw material. Which of the following is related to this situation?
A) Average fixed costs will decrease.
B) Average variable costs will decrease.
C) This is the idea of purchasing by licensing.
D) Average managerial capacity will increase.
E) Cash flow will decrease.

Question

Quizplus · Accepted Answer

Purchasing raw material in larger quantities will lead to economies of scale, resulting in lower average variable costs for the business.

Because a New Business Has Grown Considerably,it Can Now Purchase