Page 28 - Financial Accounting 1 ITC Preparation June 2018

ITC EXAM PREP – JUNE 2018

Measurement

Production overheads

• Variable overheads

• vary according to production

• Allocated to cost of inventory based on actual production

• Fixed overheads

• do not vary according to production levels

• Allocated to cost of inventory based on “normal capacity”
• Unless actual production greater than normal capacity

• Then allocated based on actual production

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