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Upon Closure, a GL account created, which is credited to Capacity Variance account (Cost of the Capacity (Setup Time + (Qty * Run Time) * Unit Cost) and Debit FG Inventory Account.
My question, why it is credited to Capacity Variance. Is this variance from BC perceptive. Could someone explain this please. Thanks in advance for the info.
Do you have "standard costing method" for that item? If yes then ‘Capacity Variance’ is the difference between the planned labor hours and the number of labor hours actually used. For example you planned to use 1 hour of labor but acutely used 30 min or 90 min. Then this difference post in Capacity Variance.
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