In the context of strategies for expanding capacity, which of the following statements is true of one large capacity increase
A) This strategy aims to match capacity additions with demand as closely as possible.
B) An advantage of using this strategy is that the fixed costs of construction and operating system setup need to be incurred only once.
C) This strategy waits until demand has increased to a point where additional capacity is necessary.
D) When this strategy is used, there is always excess capacity and safety capacity to meet unexpected demand from large orders is provided.

Question

Quizplus · Accepted Answer

One large capacity increase strategy involves making a significant investment in infrastructure or equipment in anticipation of future demand. This strategy allows the fixed costs of construction and operating system setup to be incurred only once, resulting in economies of scale and lower unit costs. However, there may be a period of excess capacity before demand catches up with the increased capacity.

In the Context of Strategies for Expanding Capacity, Which of the Following