Question

when tomas learned that the inventory levels were still at 90%, he instructed the sales team to sell the product 35% lower than the cost to produce the product in order to bring the inventory down to acceptable levels. this demonstrates the idea of blank . multiple choice question.

Answer 1

The concept demonstrated in this scenario is economies of scale. By selling the product 35% lower than the cost to produce it, the company aims to reduce inventory levels to acceptable levels.

Step-by-step explanation:

The concept demonstrated in this scenario is economies of scale. Economies of scale is the idea that as the quantity of output increases, the cost per unit decreases. In this case, by selling the product 35% lower than the cost to produce it, the company is trying to reduce the inventory levels to acceptable levels.

For example, if the cost to produce one unit of the product is $10, selling it 35% lower would be $6.50. By doing this, the company hopes to sell a larger quantity of the product at a lower average cost, thereby reducing the inventory levels.

Economies of scale are commonly observed in industries where larger factories or stores can produce or sell goods at lower costs compared to smaller ones.