Which statement is true concerning capacity costs?
A)Capacity costs are certain fixed costs that provide a firm with the capacity to produce or sell or both.
B)Capacity costs need not be incurred in the short run to conduct business.
C)Capacity costs are uncontrollable in the long run.
D)Capacity costs are always non-value added.

Question

Quizplus · Accepted Answer

Capacity costs are fixed costs that are incurred to provide a firm with the capacity to produce or sell or both, such as building and equipment costs. They are essential costs that a business cannot avoid and are incurred irrespective of the level of production or sales.

Which Statement Is True Concerning Capacity Costs