The Disadvantage of Maintaining Enough Manufacturing Capacity to Meet Demand

question 17

Multiple Choice

The disadvantage of maintaining enough manufacturing capacity to meet demand in any period is

• A)much of the expensive capacity would go unused during most months when demand was lower.
• B)the expensive capacity would be used consistently throughout the year.
• C)most of the expensive capacity would still be used during most months when demand was lower.
• D)very low inventory costs because no inventory needs to be carried from period to period.

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Definitions:

Market Segments

Specific groups within a market, distinguished by their unique needs, preferences, or demographic profiles, which businesses target with tailored products or services.

Break-even Chart

A graphical representation that shows when a business will be able to cover all its expenses and start generating a profit, based on varying levels of output or sales.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums, over a specified period.

Variable Costs

Costs that vary in direct proportion to changes in the level of production or sales volume, such as raw materials and labor.