When actual production is below practical capacity, there will be unused-capacity cost only in the manufacturing function while unused capacity is not a factor in nonmanufacturing links of the value chair such as in the marketing function.

Question

Quizplus · Accepted Answer

Capacity costs also arise in nonmanufacturing parts of the value chain. When actual production is below practical capacity, there will be unused-capacity cost issues with the marketing function and even in other areas such as distribution, as well as with the manufacturing function.

When Actual Production Is Below Practical Capacity, There Will Be