Theoretical capacity 200,000 units
Practical capacity 150,000 units
Normal Capacity 130,000 units
Expected capacity 100,000 units
Rydex is trying to choose which capacity measure it should use to develop its predetermined OH rates for 2008.
a. Why does the choice of capacity measure affect the amount of under- or overapplied overhead the firm will have at the end of 2008?
b. Which capacity measure choice would likely result in the least amount of under- or overapplied overhead?
c. Which of the alternative capacity measures makes allowances for possible cycles in the industry?
Practical capacity 150,000 units
Normal Capacity 130,000 units
Expected capacity 100,000 units
Rydex is trying to choose which capacity measure it should use to develop its predetermined OH rates for 2008.
a. Why does the choice of capacity measure affect the amount of under- or overapplied overhead the firm will have at the end of 2008?
b. Which capacity measure choice would likely result in the least amount of under- or overapplied overhead?
c. Which of the alternative capacity measures makes allowances for possible cycles in the industry?