Chapter 16: Fixed Manufacturing Overhead Flashcards
1
Q
Theoretical capacity
A
Assumes 100% efficiency, 100% of the time
2
Q
Practical capacity
A
Reduction from theoretical capacity to account for anticipated unavoidable operating interruptions (maintenance, etc)
3
Q
Normal capacity
A
Level of factory activity that satisfies average customer demand over an intermediate period of time - generally averaged over seasonal/cyclical fluctuations
GAAP requires companies to allocate fixed production overhead bases on normal capacity for external financial reporting
4
Q
Budgeted production
A
Level of factory activity budgeted for the upcoming period
