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Expands the number of factories it operates

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You work for a manufacturer that in the past year has grown from a firm that operates a single factory to two factories. The chief operating officer of the company collects data on production and costs, and the numbers say that as long as the firm produces at least 1,000 units per month, the average cost of production is always lower when both factories are in operation than when the firm only uses one factory. Based on this information, some members of your company's management team want to take out a loan to build three more factories. The thinking is that the firm can continue to drive down average cost as it expands the number of factories it operates, driving up profits. What might be problematic about this plan?

Reference no: EM131263666

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