Which of the Following Is Most Likely to Be the Reason

question 37

Multiple Choice

Which of the following is most likely to be the reason companies design flexible capacity systems?

• A)to downsize capacity quickly in case competent labor is not available to make full use of the designed capacity
• B)to expand an existing facility that has extra capacity instead of relocating to larger facilities elsewhere
• C)to accommodate government requirements
• D)to produce quality products

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Definitions:

Step-Variable Cost

A cost that remains constant for a certain level of activity, but changes in step fashion once a certain threshold is surpassed.

Activity

An event that causes the consumption of overhead resources.

Variable Cost Per Unit

The cost that varies with the level of output, computed on a per-unit basis.

Fixed Cost

A fixed cost is a business expense that remains constant regardless of changes in production levels or sales volumes.