An activity measure in activity-based costing (ABC) systems is a metric that gauges the volume or rate of an activity. It serves as a basis for cost allocation within an activity cost pool, correlating changes in the measure with changes in total activity cost.
Available hours refer to the total number of hours that can be allocated to complete a job, task, or process within an accounting period, expressed in terms of machine hours, direct labor hours, or production hours.
Budgeted capacity, also known as normal capacity, refers to the productive capacity available in an organization for a budget period as stipulated in the budget for that period. This may be expressed in terms of direct labor hours, machine hours, or standard hours, providing a crucial metric for organizational planning and resource allocation.
Understanding an organization’s maximum achievable output given the available resources such as labor and machinery, under specific conditions.
A constraining factor, also known as a limiting factor, is an element that restricts or limits the production or sale of a given product. Nearly all firms encounter one or more constraining factors, which could involve limited machine-hours and labor-hours, shortages of materials and skilled labor, or restrictions related to display space, warehouse space, and working capital.
Idle capacity ratio measures the proportion of a company's total production capacity that is not being utilized during a specified period, compared to the budgeted capacity. It helps in understanding inefficiencies in resource utilization.
The time, usually measured in labor hours or machine hours, during which a production facility is unable to operate.
Production refers to the processes and methods employed to transform inputs (like raw materials, labor, and machinery) into finished products or services. The volume of production can be quantified in units, direct labor hours, machine hours, or direct labor costs.
