In the Long Run, If Service Capacity Is Inadequate for the Arrival

question 26

Multiple Choice

In the long run, if service capacity is inadequate for the arrival rate, which one of the following will likely occur?

• A) Servers will slow down.
• B) Customers will demand less.
• C) Reneging will occur.
• D) Prices will be increased.

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Definitions:

Contribution Margin

The amount by which the sales revenue of a product exceeds its variable costs, indicating the contribution towards fixed costs and profits.

Manufacturing Overhead Cost

Indirect costs related to manufacturing that cannot be traced directly to individual products, such as maintenance and factory manager salaries.

Produced Units

The total number of items manufactured by a company during a specific period.

Variable Cost Per Unit

The cost that varies with the production volume, calculated per unit of product.