The level of production that is used by most firms for budget development because it represents a logical balance between maximum production capacity and the capacity demanded by actual sales volume is:

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Normal capacity is the level of production that is used by most firms for budget development because it represents a logical balance between maximum production capacity and the capacity demanded by actual sales volume. It takes into account the downtime and other unavoidable losses that occur during production, which makes it a practical and realistic basis for budgeting.

The Level of Production That Is Used by Most Firms