Cost advantages that are gained from economies of scale in production may later be lost to inventory carrying costs.

Question

Quizplus · Accepted Answer

Economies of scale allow for lower production costs per unit, but larger-scale production also requires more inventory storage, which can result in higher inventory carrying costs. Therefore, the cost advantages gained from economies of scale may later be negated by these additional expenses.

Cost Advantages That Are Gained from Economies of Scale in Production