Question

The practical capacity for a particular production facility is best described as Select one: A. the highest level of activity possible under any circumstance. B. the highest level of activity possible allowing for normal repairs and maintenance. C. the highest level of activity at which average costs are minimized. D. the level of activity that makes the most practical sense within the framework of a given situation.

Answer 1

Answer:

The correct answer is letter "B": the highest level of activity possible allowing for normal repairs and maintenance.

Explanation:

Practical capacity is the maximum level of production a manufacturing company can reach over a determined period. The concept considers the time dedicated to the maintenance of equipment, time employees take off from work, and equipment set up. Practical capacity is used in the firm's budget to calculate the output a firm should reach.