Jorvane records its costs by nature in a production costs account. This month, it recorded there 300,000 of direct costs (materials and direct labour), 60,000 of variable production overheads and 200,000 of fixed overheads. Its monthly normal capacity is 50,000 units; a breakdown limited production to 40,000 units, a level considered abnormally low, all in inventory at the end of the month. Record the entry capitalising the production costs in inventories, showing the unallocated fixed overheads separately.
- Direct costs for the month
- 300,000
- Variable production overheads
- 60,000
- Fixed production overheads
- 200,000
- Normal capacity (units)
- 50,000
- Actual production (units)
- 40,000