A decrease in the volume of production results in ____________?
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Answer: B. lower repair cost
Explanation
Lower production volume reduces overall machinery utilization and operational wear and tear across the manufacturing plant. Reduced equipment usage directly translates into fewer breakdowns and lower ongoing maintenance and repair costs. Consequently, a decrease in production volume results in lower repair costs for the facility equipment. Equipment maintenance costs typically contain both fixed preventive service charges and variable repair expenses tied to usage. Lower operating hours reduce physical friction and stress on mechanical parts, extending machine life spans. Cost analysts study the relationship between production volume and equipment maintenance to forecast variable repair budgets.
Higher setup cost is incorrect because setup frequencies are driven by batch numbers rather than total unit production volume drops. Higher repair cost contradicts the logical reduction in equipment wear and tear achieved when production volume decreases. Higher setup cost is repeated in the options list and remains incorrect due to its confusion between setups and repairs.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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