Budgeted fixed manufacturing costs of a product using practical capacity ________.
A) represents the cost per unit of supplying capacity
B) can result in setting selling prices that are not competitive
C) includes the cost of unused capacity
D) should be used to evaluate a marketing manager's performance in the current year

Question

Quizplus · Accepted Answer

Budgeted fixed manufacturing costs using practical capacity represent the cost per unit of supplying capacity, which is a measure of how much it costs to produce each unit based on the available capacity, regardless of how much of that capacity is actually used. This is useful for pricing decisions and cost evaluation, but may not reflect current market conditions and could result in non-competitive selling prices. The cost of unused capacity is not included, as it is not being used in production. Evaluation of a marketing manager's performance would depend on many factors, not just fixed manufacturing costs using practical capacity.

Budgeted Fixed Manufacturing Costs of a Product Using Practical Capacity