If a plant is operating at full capacity and receives a one-time opportunity to accept an order at a special price below its usual price, then fixed costs are not relevant. the order will likely be rejected. only variable costs are relevant. the order will likely be accepted.

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Geography

Heidy Marshall

10 July, 14:56

If a plant is operating at full capacity and receives a one-time opportunity to accept an order at a special price below its usual price, then fixed costs are not relevant. the order will likely be rejected. only variable costs are relevant. the order will likely be accepted.

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Answers (1)

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Emanuel Farmer · Answer 1

the order will likely be rejected

Explanation:

• Maximum theoretical capacity, nominal or design capacity. It is the one defined when a new (industrial) installation is planned where it is expected to achieve a certain ideal production when the plant is effectively in operation, it is the capacity that we will obtain if we work 365 days a year for 24 hours. of the day, it is a theoretical value never attainable. If we have entrusted the assembly of the plant to third parties, I think it is necessary that its suppliers define said Maximum Theoretical Capacity, so we should demand that both agree.

• Maximum Practical Capacity. It is the industrial capacity where it is expected to achieve a certain production when the plant is effectively in operation.

• Effective or Demonstrated Capacity. It is the one obtained in normal operating conditions with the normal calendar and usual shifts, with a state of maintenance of the process within the usual. It is a capacity that can be sustained for continuous (long) periods of time.

Already described the definition of maximum capacity there is no reason why we should accept a single order in disadvantageous conditions, since it is assumed that if you are working at maximum capacity it is because you can place the generated product on the market.