Budgeted capacity, also known as normal capacity, refers to the productive capacity available in an organization for a budget period as stipulated in the budget for that period. This may be expressed in terms of direct labor hours, machine hours, or standard hours, providing a crucial metric for organizational planning and resource allocation.
Normal capacity is a measure of production that reflects the average level of operating activity needed to meet production demands over a long period. It considers both seasonal fluctuations and normal occurrences of idle time.
