A cake manufacturer buys more sugar as its production output increases. This enables it to buy the sugar at a lower price per kilogram. What is this an example of?
Understand the Problem
The question is asking for an example of a business concept related to bulk purchasing and cost reduction as production increases. The concepts listed are logistics, just-in-time, global sourcing, and economies of scale. The user needs to identify which of these best describes the scenario given.
Answer
Economies of scale
The final answer is Economies of scale.
Answer for screen readers
The final answer is Economies of scale.
More Information
Economies of scale refer to the cost advantage a business achieves due to an increase in production. As the cake manufacturer buys more sugar, the cost per unit decreases because of bulk purchasing discounts.
Tips
A common mistake is confusing economies of scale with logistics. Logistics deals with the efficient movement and storage of goods, not cost reduction through increased purchasing.
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