If a company has excess capacity,increases in production level will increase variable production costs but not fixed production costs.

Question

Quizplus · Accepted Answer

Excess capacity means that the company has unused resources such as equipment or labor. Therefore, increasing production levels will only increase variable costs associated with producing more units, such as raw materials or hourly wages. Fixed costs, such as rent or insurance, will not be affected as they do not vary with production output.

If a Company Has Excess Capacity,increases in Production Level Will