Capacity cost is
A)only an inventoriable cost.
B)only a period cost.
C)never amortized.
D)a variable manufacturing overhead cost.
E)a fixed manufacturing overhead cost.

Question

Quizplus · Accepted Answer

Capacity cost refers to the fixed costs of producing products or providing services regardless of the level of production or sales. It is typically associated with fixed manufacturing overhead costs that cannot be directly traced to specific products. Therefore, it is a fixed manufacturing overhead cost and not a variable manufacturing overhead cost. It is also not an inventoriable cost because it is not directly related to the production of a specific product, but is instead allocated to the products using predetermined overhead rates. Finally, it can be amortized over time, typically as a period cost, rather than being expensed immediately.

Capacity Cost Is