The cost of unused capacity can be determined using ABC costing for the purpose of:
A)Determining more accurately the ABC costs.
B)Helping managers plan the short and longer-term use of the operating resources.
C)Determining product profitability.
D)Completing an effective activity analysis.
E)All of the above.

Question

Quizplus · Accepted Answer

The cost of unused capacity can be determined using ABC costing to help managers plan the short and longer-term use of the operating resources. By identifying the cost of idle capacity, managers can take action to utilize the available resources more effectively and therefore reduce the total cost of production. Unused capacity is a significant cost for companies that operate in industries with high fixed costs, such as manufacturing, transportation, and utilities. Therefore, determining the cost of unused capacity can help managers make informed decisions and optimize the use of their resources.

The Cost of Unused Capacity Can Be Determined Using ABC