Understanding an organization’s maximum achievable output given the available resources such as labor and machinery, under specific conditions.
A constraining factor, also known as a limiting factor, is an element that restricts or limits the production or sale of a given product. Nearly all firms encounter one or more constraining factors, which could involve limited machine-hours and labor-hours, shortages of materials and skilled labor, or restrictions related to display space, warehouse space, and working capital.
In a system of standard costing, the fixed overhead efficiency variance represents the difference between the actual labor hours worked and the standard time allowed for the quantity actually produced, valued at the standard fixed overhead absorption rate per hour.
Idle capacity ratio measures the proportion of a company's total production capacity that is not being utilized during a specified period, compared to the budgeted capacity. It helps in understanding inefficiencies in resource utilization.
The time, usually measured in labor hours or machine hours, during which a production facility is unable to operate.
A 'Tour of Duty' can refer to either the duration of a specific military assignment or the scheduled work hours of an employee in a contiguous block of time.
Understand the key concept of variable overhead efficiency variance within a standard costing system, and how it affects business financial performance.
