Which of the following is true of theoretical capacity?
A) It will be less than the real capacity available to a company.
B) It provides the best perspective of actual long-run costs.
C) It results in the lowest cost estimate of the four capacity options when used for product costing.
D) It replicates the cost of capacity in a competitor's cost structure.

Question

Quizplus · Accepted Answer

Theoretical capacity assumes maximum efficiency with no downtime or interruptions, leading to the lowest cost estimate when used for product costing, as it spreads fixed costs over the maximum possible output.

Which of the Following Is True of Theoretical Capacity