Question

Santa Lucia Industries employs 500 workers in the factory. These workers produced 85,000 units in the preceding year. Due to a special order, the units produced in the current year increased to 95,000 units. However, Santa Lucia produced these units without adding workers. How is that possible?

a.The plant had some unused activity capacity.

b.The employees were a flexible resource in this situation.

c.The labor cost associated with the additional units sold will be a relevant cost.

d.None of these choices are correct.

Answer 1

The right answer is option (a) The plant had some unused activity capacity.

The industry has 500 workers and these workers produced 85000 units in the preceding year and 95000 units in the current year.There reason could be the industry with 500 workers are more efficient or has an additional capacity. If there is an additional capacity, then they can produce more number of units as far as their production is with in the capacity limits. As a result, the possible reason is unused activity capacity. therefore, the right answer is option (a).