If Consideration Is Being Given to Closing a Department a Complete

question 45

Multiple Choice

If consideration is being given to closing a department a complete analysis should include all of the following except:

• A) the costs of closure.
• B) alternative uses of the space provided.
• C) the effect that the closure might have on the sales of other departments.
• D) the overhead costs of the entity that have been allocated to the department.

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Definitions:

Excess Capacity

A situation where a company or economy can produce more goods or services than currently demanded, often leading to inefficiency and lower prices.

Excess Capacity

A scenario where a firm or industry has unused production resources, leading to inefficiencies and lowered profitability.

Productive Inefficiency

A situation where resources are not used in the most cost-effective way, resulting in a higher production cost than necessary.

Allocative Inefficiency

A situation where resources are not allocated efficiently, leading to a mismatch between what is produced and what consumers actually demand, causing wastage and loss of potential welfare.