Which of the following statements is true of contract manufacturing?
A) It requires companies to increase its labor force to meet the scale of market demand.
B) It requires firms to meet the scale of market demand by committing to long-term capital investments.
C) It enables a firm to tap the greater economies of scale.
D) It decreases organizational responsiveness to the environment.

Question

Quizplus · Accepted Answer

Contract manufacturing allows a firm to tap into the greater economies of scale of a contract manufacturer, as they often have specialized equipment and processes for producing goods more efficiently. This can help the firm save on production costs and increase profitability. Option A is incorrect as contract manufacturing allows firms to avoid increasing their labor force by outsourcing production to the contract manufacturer. Option B is incorrect as contract manufacturing allows firms to avoid committing to long-term capital investments by outsourcing production to the contract manufacturer. Option D is incorrect as contract manufacturing allows firms to be more responsive to environmental changes by quickly adjusting production levels with the contract manufacturer.

Which of the Following Statements Is True of Contract Manufacturing