During a period of idle capacity, the firm wastes both managed and committed capacity costs.

Question

Quizplus · Accepted Answer

During a period of idle capacity, the firm primarily wastes committed capacity costs, which are fixed costs incurred regardless of the level of production or activity. Managed capacity costs, which can be adjusted or managed based on production needs, are not necessarily wasted as they can be controlled or reduced in response to idle capacity.

During a Period of Idle Capacity, the Firm Wastes Both