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Overhead Cost Discussion

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Respond to the following:
a. Suppose the following was overheard at the water cooler: "I think our medical device company should take advantage of economies of scale by increasing our output, thereby spreading out our overhead costs."
b. Would you agree with this statement (assuming this person is not your boss)? Why or why not? Explain.

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Solution Summary

This solution discusses overhead costs and agreement with the statement above in 469 words with two references and in-text citations.

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Overhead Cost Discussion:

Overhead costs are costs which have no relation on direct labor, administration or materials. For a business, overhead costs of resources are used by an organization with an aim of ensuring that its existence is maintained. Monetary terms are used to measure overhead costs however, there are incidents whereby non monetary terms are used to measure the costs of overhead whereby time may be used as the unit of measurement in accomplishing the required tasks. Some examples of overhead costs are electricity costs within working premises, wages spent on an organization's personnel, and rent payment on the space that a business premises occupies.

I would agree with the statement that the medical device company had the capability of taking advantage of the economies of scale through ...

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