Question: When activity-based cost reports indicate that excess capacity exists, management should either find alternative revenue-enhancing uses for that capacity or eliminate it through downsizing. What

When activity-based cost reports indicate that excess capacity exists, management should either find alternative revenue-enhancing uses for that capacity or eliminate it through downsizing. What factors influence management’s decision? What are the likely behavioral side effects of each choice? What implications do those side effects have for the long-run usefulness of activity-based cost systems?

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