Frito-Lay uses aggregate planning to match capacity with demand because of the ________ associated with its specialized processes.
A)high variable cost and high fixed cost
B)high variable cost and low fixed cost
C)low variable cost and high fixed cost
D)low variable cost and low fixed cost
E)none of the above

Question

Quizplus · Accepted Answer

Frito-Lay's specialized processes have high fixed costs (e.g. expensive production equipment) that remain the same regardless of production level. Therefore, it's important to use aggregate planning to match capacity with demand and avoid underutilization of these fixed costs. The variable costs (e.g. cost of materials and labor) are lower in comparison to the fixed costs.

Frito-Lay Uses Aggregate Planning to Match Capacity with Demand Because