When Demand Exceeds Capacity, All of the Following Are Reasonable

question 192

Multiple Choice

When demand exceeds capacity, all of the following are reasonable options for the firm except

• A) operating overtime hours to meet the demand.
• B) starting a second or third shift.
• C) subcontracting part of the work to other producers.
• D) turning away some long-time customers.
• E) expanding the capacity of the current facility.

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Definitions:

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, based on the account type.

Temporary/Permanent

Categories used to distinguish between accounts that are closed at the end of an accounting period (temporary) and those that carry forward their balance into future periods (permanent).

Accrued Interest

Interest on loans or bonds that has accumulated but not yet been paid.

Note Receivable

An asset account representing amounts owed to a company by customers or others who have signed promissory notes in favor of the company.