Increasing Capacity Utilization Beyond the Best Operating Level Results in Diseconomies

question 15

True/False

Increasing capacity utilization beyond the best operating level results in diseconomies of scale.

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Definitions:

Volume Variance

The difference between the expected volume of production or sales and the actual volume, affecting budget and performance analysis.

Fixed Overhead

Fixed overhead refers to the indirect costs of production that remain constant regardless of the level of output, such as rent, salaries, and insurance.

Machine Hour

A measure of the operating time of a machine, used in costing to allocate expenses based on machine use.

Variable Overhead

Costs that vary in direct proportion to changes in a firm's level of activity, such as utilities or raw materials.