The cost of wasted capacity is
A)the reduction in margin that results from having to go to a backup source.
B)the margin that would have been generated if the capacity had been used for production.
C)the productivity increase generated when the capacity is used for production.
D)the sales potential of excess capacity kept in reserve for emergency production.

Question

Quizplus · Accepted Answer

The cost of wasted capacity is the margin that would have been generated if the capacity had been used for production. Wasted capacity refers to the unused or underutilized potential of resources, which represents a cost for the organization, as it could have been used for generating revenue or reducing costs. Therefore, option B is the best answer. The other options may represent costs or benefits associated with capacity management, but they do not specifically address the cost of wasted capacity.

The Cost of Wasted Capacity Is