What Risk Arises When Demand Is Operating Between Optimum and Maximum

question 75

Multiple Choice

What risk arises when demand is operating between optimum and maximum capacity?

• A)Service quality may suffer, leading to dissatisfied customers
• B)Customer attitudes may improve when they see how busy the company is
• C)Service may improve above the optimum level, surprising customers
• D)Productive resources may be underused, resulting in low productivity
• E)Customers may perceive the company as unlikely to survive

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Definitions:

Activity Cost Pool

A way to group all the costs related to a specific activity or process, used in activity-based costing.

Direct Labor Rate

The cost per hour that a company pays for direct labor, typically related to the production of goods.

Direct Materials Cost

The cost of raw materials directly used in the production of a product, easily identifiable and assignable to the product.

Activity-Based Costing System

A costing method that assigns costs to products or services based on the resources they consume and the activities they require.