Question

If actual units of capacity in the current year are less than the prior year, the cost effect of productivity for fixed costs will be

Answer 1

Lesser

Step-by-step explanation:

Fixed Costs are the cost incurred on fixed factors of production, like building machine etc. These are incurred irrespective of the level of output.

Average fixed cost for a period of time is fixed cost per unit of output.

AFC = TFC / Q

So, less capacity production in current year being less than prior year. So, lesser Q implies that AFC per unit is high. Hence productivity for fixed cost will be lower.