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When should I use "normal 100%" capacity units versus "standard" or "actual" units.

When should I use "normal 100%" capacity units versus "standard" or "actual" units.
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Answer #1

It might seem obvious to calculate overheads or expenses based on the actual or standard ouput , as it depicts the actual cost per unit that has been incurred.

However there might be cases wherein there will be idle time or other abnormal reasons which might lead to the difference between the actuals and the normal capacity.

By using the normal capacity as the basis, you would derive at the proper costing for the product without the influence of idle time or any other losses , which helps you allocate the exact loss (having known the actual cost per ideal conditions) for each of the reasons and investigate into it as the object of costing remains to check efficiency of the processes and method.

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