The Idea That Improvement in One Aspect of Operations Performance

question 15

Multiple Choice

The idea that improvement in one aspect of operations performance comes at the expense of deterioration in another aspect of performance is called:

• A) Theory of constraints
• B) Trade-off theory
• C) Limited resource theory
• D) Theory of the firm

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Definitions:

Variable Cost

Costs that vary directly with the level of production or service activity.

Fixed Cost

Expenses that do not change with the level of production or sales over the short term, such as rent, salaries, and insurance.

Period Cost

An expense that is not directly tied to the production process but rather incurred over a specific time period.

High-low Method

A technique used in accounting and finance to estimate variable and fixed costs based on the highest and lowest levels of activity.