Theoretical capacity:
A)when used for product costing,results in the lowest cost estimate of the four capacity options.
B)represents real capacity available to the company.
C)provides the best perspective of actual long-run costs.
D)replicates the cost of capacity in a competitor's cost structure.

Question

Quizplus · Accepted Answer

Theoretical capacity, when used for product costing, results in the lowest cost estimate because it assumes 100% efficiency and no downtime, spreading fixed costs over the maximum possible output.

Theoretical Capacity