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AS - 2

C.A. Sandeep Wawhal (Chartered Accountant PGDFM BCom.) (1823 Points)

30 October 2017

Friends,

As per AS 2, allocation of fixed production overhead is to be done on normal capacity of production. If a company produced product more than normal capacity then which capacity to be considered ?

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3 Replies

satish (teaching) (2046 Points)
Replied 22 December 2017

when company actually works at more than normal capacity level, allocation of fixed overheads under Actual Capacity.

(Guest)

Fixed ohd absorption can never be more than actually incurred ! how can u charge more expense than actually incurred ?

satish (teaching) (2046 Points)
Replied 04 September 2018

suppose normal capacity is 1000 units. actual capacity is 1250. fixed over heads is 1,00,000.
when ever actual capacity is greater than normal, so allocation of fixed over heads is under actual capacity.
so over heads per hour is 80.
then fixed over heads absorption will not exceed 1,00,000