Capacity Requirements Are Computed by Multiplying the Number of Units

question 13

Multiple Choice

Capacity requirements are computed by multiplying the number of units scheduled for production at a work center by:

• A) the setup time and then subtracting the unit resource requirements.
• B) the setup time and then adding the unit resource requirements.
• C) the unit resource requirements and then adding in the setup time.
• D) the unit resource requirements and then subtracting the setup time.

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Definitions:

Target Net Profit

Target net profit is the specific amount of net income that a company aims to achieve within a certain period, guiding pricing, cost management, and sales volume strategies.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit. This figure shows how much each unit contributes to covering fixed costs and generating profit.

Fixed Costs

Expenses that do not change in total as production volume increases or decreases, such as rent and salaries.

Safety Margin

The difference between the actual level of sales or production and the break-even point, measuring the cushion a company has before it incurs losses.