Capacity costs are variable costs related to a desired level of production or service.

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Capacity costs are fixed costs that are incurred regardless of the level of production or service. They include costs of facilities, equipment, and other assets used to provide the production or service. Variable costs, on the other hand, are costs that vary with the level of production or service, such as raw materials, direct labor, and utilities.

Capacity Costs Are Variable Costs Related to a Desired Level