Assume That a Firm Did Not Operate at Full Capacity

question 29

Multiple Choice

Assume that a firm did not operate at full capacity in the current year. The firm should increase its plant and equipment only if:

• A) its variable cost of goods sold ratio changes in the next year with an increase in operations.
• B) the additional sales forecasted in the next year exceed the unused capacity of the existing assets.
• C) the internally generated funds are in surplus to support the forecasted increase in sales.
• D) the addition of fixed assets in large, discrete units results in economies of scale.
• E) fixed operating costs are not recovered by the revenue from each unit sold by the firm.

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Definitions:

Spot Rates

The existing market value at which one can buy or sell a currency for instant delivery.

Selling Price

The set amount of money for which a product or service is sold to customers.

Spot Rates

The present cost at which a specific asset is available for purchase or sale with immediate delivery.

Selling Price

The amount of money for which an item is sold to a buyer.