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As part of its promotional efforts, Department Store X utilizes small-scale promotional signs at its retail stores. At each of the 75 store locations,
As part of its promotional efforts, Department Store X utilizes small-scale promotional signs at its retail stores. At each of the 75 store locations, the company produces an estimated 100 promotional signs per month. Each small "sign shop" operates as its own unit, and each location incurs the same variable costs to use the machines. Installation costs, those incurred to set up the machine for printing, printing costs (paper, ink, etc.), and maintenance costs comprise total production costs. On average, monthly production costs are estimated to be $5,000 per machine: $1,000 for installation, $3,000 for printing, and $1,000 for maintenance is incurred at each location. Therefore, the total production of these signs costs the company, approximately $375,000 per month. An economic consultant estimates that total production costs for printing the signs in one location would be approximately $231,000 per month. Installation costs for the single machine will be $1,000. Justify the decision of printing the signs in one location clearly indicating any possible cost savings.
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Printing the signs in one location can lead to cost savings for Department Store X Heres a justification for this decision Economies of Scale By centr...Get Instant Access to Expert-Tailored Solutions
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