What is a characteristic of a facility with excess capacity?

A facility with excess capacity is characterized by its ability to produce more than the current demand for its products. This situation often leads to higher per unit efficiency because the facility can spread its fixed costs over a larger number of units. As a result, even though the facility is not operating at full capacity, the production process may be optimized to ensure that those units are produced as efficiently as possible.

When overhead costs are divided among more products, the fixed costs per unit decrease. This can lead to greater efficiency in terms of resource use and labor allocation, hence providing the potential for increased productivity when there is enough demand to utilize the excess capacity. Thus, the presence of excess capacity can lead to improved performance metrics as long as the facility can respond effectively to increases in demand without necessarily incurring higher variable costs.

In contrast, the other choices do not accurately capture the essence of how excess capacity affects facility operations. More units produced per hour (the first option) implies that the facility is operating at a high level of demand rather than having excess capacity. Lower overhead costs (the third option) might not be related directly to the existence of excess capacity, as overhead might still be high despite having more room to produce. Fewer products being stored (the fourth