Asked by Aleya Smith on Jul 02, 2024
Verified
If a company has excess capacity,increases in production level will increase variable production costs but not fixed production costs.
Excess Capacity
The amount by which the actual production of a company exceeds its planned production capacity.
Variable Production Costs
Expenses that change in direct proportion to the level of production output.
- Identify the role of fixed and variable costs in product pricing and short-term decision making.
Verified Answer
TA
Trina Abellera6 days ago
Final Answer :
True
Explanation :
Excess capacity means that the company has unused resources such as equipment or labor. Therefore, increasing production levels will only increase variable costs associated with producing more units, such as raw materials or hourly wages. Fixed costs, such as rent or insurance, will not be affected as they do not vary with production output.
Learning Objectives
- Identify the role of fixed and variable costs in product pricing and short-term decision making.
Related questions
Information Presented in a Variable Costing Format Can Assist Management ...
Piper Rose Boutique Has Been Approached by the Community College ...
Target Selling Price to Be Achieved in the Long Term ...
The Area Under the Marginal Cost Curve Measures Total Variable ...
A Profit-Maximizing Firm Continues to Operate Even Though It Is ...