What is the biggest advantage of using practical capacity to allocate costs?

Question

Quizplus · Accepted Answer

Using practical capacity to allocate costs helps to focus management's attention on unused capacity. This is because practical capacity is a measure of what the company could realistically produce if it were operating at its best level, taking into account factors like downtime, maintenance, and employee vacations. By allocating costs based on practical capacity, managers can see how much capacity is going unused in different departments and make decisions about how to utilize that capacity more effectively. This can lead to cost savings and increased profitability for the company.

What Is the Biggest Advantage of Using Practical Capacity to Allocate