The real cost of underutilizing productive capacity is due to the lost contribution margins of the products that are not produced when capacity is underutilized.

Question

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Underutilizing productive capacity means that a business is not producing as much as it could with the resources available, leading to lost opportunities for earning contribution margin on additional products that could have been sold. This lost contribution margin represents the real cost of underutilization.

The Real Cost of Underutilizing Productive Capacity Is Due to the Lost