Exam CSCP topic 1 question 436 discussion

A: "Lower utilization which leads to higher cost," suggests that allocating excess capacity may result in lower utilization of resources within the facility. This lower utilization could imply inefficiency, as resources are not fully utilized, leading to higher costs per unit of output. However, it's essential to consider that excess capacity often means that fixed costs (e.g., rent, utilities) are already incurred regardless of utilization level, so while unit costs may increase due to underutilization, total costs might not necessarily increase.

Lower utilization which leads to higher cost. Excess capacity means the facility has the potential to produce more than it currently does. This option reflects the fact that when a facility operates below its capacity, the fixed costs are spread over a smaller volume of production or operations, increasing the cost per unit.

Allocating excess capacity to a supply chain facility is most likely to result in higher utilization which leads to lower cost. Capacity allocation is the process of assigning available resources, such as people, equipment, or facilities, to different tasks or activities. By allocating excess capacity to a supply chain facility, businesses can increase the utilization of the facility without incurring additional costs or investments. This can help reduce the overall cost of the facility and improve its efficiency and productivity.