Describe the Three Capacity Strategies and the Advantages of Each

question 58

Essay

Describe the three capacity strategies and the advantages of each.

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Definitions:

Labour Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, based on the standard rate per hour.

Standard Cost Per Mip

Standard cost per MIP refers to the benchmark or predetermined cost assigned to manufacturing one unit of measurement or milepost in production, used for budgeting and performance evaluation.

Direct Labour

Compensation for employees who are directly involved in manufacturing products or providing services.

Direct Materials

Raw materials that can be directly traced to the production of a specific product.