When a firm has excess capacity, a price that covers the incremental costs incurred because of the job will contribute toward covering the company's fixed cost and profit.

Question

Quizplus · Accepted Answer

When a firm has excess capacity, pricing a job to cover incremental (or variable) costs will contribute to covering fixed costs and potentially generate profit, since the fixed costs are already incurred and would not increase with the additional job.

When a Firm Has Excess Capacity, a Price That Covers