Chapter 9, Problem 9.29E

Capacity management, denominator-level capacity concepts. Match each of the following numbered descriptions with one or more of the denominator-level capacity concepts by putting the appropriate letter(s) by each item:

1. a. Theoretical capacity
2. b. Practical capacity
3. c. Normal capacity utilization
4. d. Master-budget capacity utilization
5. 1. Measures the denominator level in terms of what a plant can supply
6. 2. Is based on producing at full efficiency all the time
7. 3. Represents the expected level of capacity utilization for the next budget period
8. 4. Measures the denominator level in terms of demand for the output of the plant
9. 5. Takes into account seasonal, cyclical, and trend factors
10. 6. Should be used for performance evaluation in the current year
11. 7. Represents an ideal benchmark
12. 8. Highlights the cost of capacity acquired but not used
13. 9. Should be used for long-term pricing purposes
14. 10. Hides the cost of capacity acquired but not used
15. 11. If used as the denominator-level concept, would avoid the restatement of unit costs when expected demand levels change