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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AS - 2
Replies (3)
when company actually works at more than normal capacity level, allocation of fixed overheads under Actual Capacity.
Fixed ohd absorption can never be more than actually incurred ! how can u charge more expense than actually incurred ?
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
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
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