Management Is Interested in Utilizing the Full Capacity of Production

question 42

Multiple Choice

Management is interested in utilizing the full capacity of production facilities because it

• A)spreads variable costs over a greater number of units, thereby reducing the variable cost per unit.
• B)spreads fixed costs over a greater number of units, thereby reducing the fixed cost per unit.
• C)reduces total variable costs.
• D)reduces total fixed costs.

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Definitions:

Operating Expenses

Regular expenses associated with the operation of a business, such as rent, utilities, and payroll, not directly tied to production.

Cost of Sales

The immediate expenses related to the manufacturing of products sold by a business, encompassing costs for materials and labor.

Cash Receipts

Money received by a business during a particular period, including revenues from sales and other transactions.

Cash Disbursements

Outflows of cash, typically categorized for financial reporting and analysis of a company’s cash outflow activities.