Since fixed cost remains fixed within a range, product cost can be minimised at the maximum possible capacity utilisation within the given range. The cost incurred because of capacity under-utilisation is termed as capacity cost.
Stores and spares used in the production process are generally considered as indirect materials. They are part of manufacturing overhead. Sometimes store and spares are linking to a particular job or product in case they are of proportionately high value. They are considered as direct material.
Cost of packaging materials forms part of selling and distribution cost. This is a variable cost as cost of packaging varies directly with the number of units finished. However this is added to cost of finished goods if they are already packaged.
To Schedule a Accounting Capacity Cost tutoring session
Accounting | Accounting Homework help | Help with Accounting | Management Accounting | Accounting Assignment help | Cost Accounting | Online Tutoring | Financial Accounting | Email Based Accounting Homework Help