The concept of unused capacity is important in product categories with high-fixed-cost and high contribution-margin.

Question

Quizplus · Accepted Answer

Unused capacity refers to the productive capacity that is not currently being utilized. In product categories with high-fixed-cost and high contribution-margin, unused capacity can be leveraged to increase profits. This is because the contribution margin can be used to cover the fixed costs, and any additional units produced using the unused capacity will have higher profits due to the high contribution margin. Therefore, the concept of unused capacity is particularly important in such product categories.

The Concept of Unused Capacity Is Important in Product Categories