Question $108$

$1pts$

SCM$310-5011/$ Harry Smith, President of Automation Plastics is looking to produce and sell a new type of plastic water valve. Currently he is forecasting demand of $500,000$ units in the first year and an increase in demand to more than $1,000,000$ units annually in the next two year. If he outsources production to a supplier, the costs per unit will be $25$ cents no matter what volume. If he purchases new equipment and makes the product, his initial cost per unit will be about $30$ cents. The equipment he is considering is capable of producing as many as $3,000,000$ units per year and as production volume increases from $500,000$ the cost per unit will decrease $-$ eventually reaching $15$ cents per unit. The decrease in unit costs as production volume increases is an example of$.$

Capital Asset Pricing

Supplier Management

Economies of Scale

Process Analysis and Development