Dan Ellis Acc 412 9-25 - it takes into account some...

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Budgeted fixed manufacturing overhead rates for each of the four concepts Overhead Costs Units Total Per Unit Theoretical Capacity $ 6,480,000 5,400 $ 1,200 Practical Capacity $ 6,480,000 3,840 $ 1,688 Normal Capacity $ 6,480,000 3,240 $ 2,000 Master-budget Capacity $ 6,480,000 3,600 $ 1,800 2. A benefit of the Theoretical Capacity is that it can give a goal that is attainable if you worked without any flaws. As for Practical Capacity, It shows a reasonable goal that is more realistic because
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Unformatted text preview: it takes into account some unavoidable situa±ons which will stall progress. 3. A master budget capacity can have its benefts and nega±ve ascpects to go with it. The posi±ve side is that you know how much you spend in manuFacturing because you budget it For the beginning oF the year and won't get surprised at the end oF the year. A nega±ve aspect though is that you are probably producing below capacity and the cost will spread across Fewer number oF products....
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