Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?
A) master-budget capacity utilization to highlight unused capacity
B) normal capacity utilization for benchmarking purposes
C) practical capacity for pricing decisions
D) theoretical capacity for performance evaluation

Question

Quizplus · Accepted Answer

Practical capacity is often used for pricing decisions as it considers the maximum output that can be achieved under normal working conditions, excluding downtime and maintenance, providing a realistic measure for cost allocation.

Which of the Following Capacity Levels Should a Company Choose