Which of the Following Is False Regarding Capacity Expansion

question 78

Multiple Choice

Which of the following is false regarding capacity expansion?

• A) "Average" capacity sometimes leads demand, sometimes lags it.
• B) If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting.
• C) Total cost comparisons are a rather direct method of comparing capacity alternatives.
• D) Capacity may only be added in large chunks.
• E) All of the above are true.

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Definitions:

Hard Rationing

A situation where companies cannot obtain funds for investment, even if they are willing to pay higher interest rates, due to external factors.

Net Present Value

A calculation that determines the current value of a series of future cash flows, discounted back to their present value at a specific discount rate.

Funding Requests

Applications or appeals for financial support, typically made by businesses or organizations to potential investors or grant bodies.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales volume, indicating how earnings are affected by revenue changes.