Which of the Following Statements About the Option to Build

question 52

Multiple Choice

Which of the following statements about the option to build flexibility into production facilities is true?

• A)Typically, production flexibility is more expensive.
• B)One should consider the NPV of alternative production configurations.
• C)Production flexibility may be valuable by enabling the firm to choose the inputs with the lowest available costs.
• D)All of the options are true.

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Definitions:

Manufacturing Overhead

The total of all the indirect costs involved in manufacturing a product, which can include expenses related to equipment maintenance, factory rent, and utilities.

Standard Cost System

An accounting method where costs are predetermined for products and services, facilitating the analysis of variances between expected and actual costs.

Supplies Cost

The expenses associated with purchasing materials and supplies used in the operation of a business, not directly tied to production.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, such as utilities, maintenance, and factory management salaries.