Which of the Following Is True of Normal Capacity Utilization

question 164

Multiple Choice

Which of the following is true of normal capacity utilization?

• A) It will almost always show results that are very close to that of practical capacity utilization
• B) It can result in setting selling prices that are not competitive.
• C) It results in the lowest cost estimate of the four capacity options when used for product costing.
• D) It is also called master-budget capacity utilization

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available to fund its day-to-day operations.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated by adjusting the starting inventory for purchases and sales during the period.