Dictionary of Accounting Terms: capacity management
capacity management
management of a company's costs of unused (excess) capacity. The unused capacity in production facilities, distribution channels, marketing organizations, and so on are ordinarily not assigned to products or services on a cause-and-effect basis, so their inclusion in overhead rates may distort pricing decisions. Including the fixed costs of unused capacity in a cost-based price results in higher prices and in what is known as the downward (black hole) demand spiral.
