How to do we treat Idle Capacity in Cost Accounts?(Part 2 of 2)

December 9th, 2010 Comments off
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Idle capacity can be broadly divided into  Normal or AbnormalTreatment of NORMAL IDLE CAPACITY in the cost accounts:

  • Due to unavoidable reasons are included in works overheads and absorbed into the cost of production either by inflating the overhead rate or  by means of a supplementary overhead rate ( see article on details of idle capacity & its reasons )

Treatment of ABNORMAL IDLE CAPACITY in the cost accounts:

  • Due to avoidable reasons such as lack of proper planning and control. Charged to costing profit & loss account

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Financial Accounting

 
 

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