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Fixed Factory Overhead

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If a factory is not operating at full capacity, and does not have the potential business to use up the remainder of its capacity, which cost should be ignored in a decision to produce additional units of product?

variable selling expenses
fixed factory overhead
direct labor
contribution margin of additional units

Why?

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Solution Summary

This posting provides a solution to a question regarding costs for operating a factory.

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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