Very High Under-Utilisation Can Make Level Capacity Plans Prohibitively Expensive

question 11

True/False

Very high under-utilisation can make level capacity plans prohibitively expensive.

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Definitions:

Overhead Allocation Bases

Criteria or measures used to distribute indirect costs to different products, services, or departments.

Direct Labour Hours

The total hours worked by employees that are directly involved in the manufacturing process.

ABC System

Activity-Based Costing System; a method of allocating overhead and indirect costs to specific products or services based on the activities they require.

Traditional Cost Systems

Traditional cost systems allocate overhead costs based on measures like direct labour hours or machine hours, often resulting in less accurate product costing.