What is the effect of spreading fixed manufacturing costs over a shrinking budgeted capacity utilisation amount?
A)Increased unit costs
B)Greater utilisation of capacity
C)Greater demand for the product
D)More competitive selling prices

Question

Quizplus · Accepted Answer

Spreading fixed manufacturing costs over a shrinking budgeted capacity utilisation amount will result in increased unit costs. As the budgeted capacity utilisation amount shrinks, the same fixed manufacturing costs will need to be spread over a smaller number of units, leading to higher unit costs.

What Is the Effect of Spreading Fixed Manufacturing Costs Over