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.
Efficiency in accounting is a measure of how effectively an organization can produce and distribute its product, typically quantified by comparing standard hours allowed for production and actual hours taken.
The fixed overhead absorption rate is calculated by dividing the budgeted fixed overheads by the budgeted production units or other budgeted production measures, reflecting the allocation of fixed manufacturing overheads to individual units of production.
In the context of standard costing systems, standard time refers to the time allowed to carry out a production task. It can be expressed either as the standard time allowed or in terms of standard hours representing the output achieved.
