Capacity management, denominator-level capacity concepts Capacity management, denominator-level capacity concepts match each of the following items with one or more of the denominator-level capacity concepts by putting the appropriate letter(s) by each item:
a. Theoretical capacity
b. Practical capacity
c.Normal capacity utilization
d. Master-budget capacity utilization
1.Measures the denominator level in terms of what a plant can supply
2. Is based on producing at full efficiency all the time
3. Represents the expected level of capacity utilization for the next budget period
4. Measures the denominator level in terms of demand for the output of the plant
5. Takes into account seasonal, cyclical, and trend factors
6. Should be used for performance evaluation
7. Represents an ideal benchmark
8. Highlights the cost of capacity acquired but not used
9. Should be used for long-term pricing purposes
10. Hides the cost of capacity acquired but not used
11. If used as the denominator-level concept, would avoid the restatement of unit costs when expected demand levels change