As manufacturing companies become more automated, their cost structure will change so that:
A) variable costs increase, fixed costs decrease.
B) variable costs decrease, fixed costs decrease.
C) variable costs decrease, fixed costs increase.
D) there is no change in the ratio of variable to fixed costs.

Question

Quizplus · Accepted Answer

As manufacturing becomes more automated, the proportion of fixed costs (e.g. equipment, technology, maintenance) increases since the initial investment in this technology is significant. Meanwhile, variable costs such as labor and materials decrease because automation means fewer employees are needed and the equipment can produce products more efficiently. Therefore, the cost structure of manufacturing companies shifts towards higher fixed costs and lower variable costs.

As Manufacturing Companies Become More Automated, Their Cost Structure Will