When capacity is constrained, the relevant revenues and costs of any alternative equal the incremental future revenues and costs plus the opportunity cost.

Question

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When capacity is constrained, the relevant revenues and costs of any alternative is calculated based on the incremental future revenues and costs plus the opportunity cost. This is because the constraint limits the ability to generate additional revenues and incurs incremental costs, making it necessary to consider the opportunity cost of using the constrained resource.

When Capacity Is Constrained, the Relevant Revenues and Costs of Any