Question

Effective planning of fixed overhead costs includes ________.

A) planning day-to-day operational decisions
B) eliminating value-added costs
C) determining which products are to be produced
D) choosing the appropriate level of capacity

Answer 1

The effective planning of fixed overhead costs involves choosing the appropriate level of capacity.

Step-by-step explanation:

The effective planning of fixed overhead costs includes choosing the appropriate level of capacity.

Fixed overhead costs are the expenses that a company incurs to maintain its production capacity, such as rent on a factory or a retail space. When planning these costs, it is important to determine the appropriate level of capacity to meet production needs.

For example, if a company expects high demand for its product, it may need to invest in a larger factory and higher fixed overhead costs to accommodate the increased production. Conversely, if demand is low, it may have to downsize its capacity and reduce fixed overhead costs to avoid unnecessary expenses.