AC505 Unit 6 Capacity Cost Analysis Worksheet Example

Course	AC505 Advanced Managerial/Cost Accounting
Unit	Unit 6
Paper type	Capacity analysis worksheet
Length	About 550 words, 4 pages double-spaced
Format	APA 7 student paper
School	Purdue University Global
Program	MS in Accounting
Updated	October 2026

Free sample paper for AC505 Unit 6

1,200 Empty Hours and a Fall Rush: A Unit 6 Capacity Analysis Worksheet for Two Roasters

[Student Name]

Purdue University Global

AC505: Advanced Managerial/Cost Accounting

Unit 6 Capacity Analysis Worksheet

[Instructor Name]

[Date]

Harrow Creek Nut Company and every figure are composite; the textbooks and article cited are real.

What this part is doingStating the capacity, the idle cost and the seasonal problem in the lead shows the worksheet's three questions.

Part 1: Four Denominators

The fixed roasting rate depends on which capacity level divides the $2,400,000.

Theoretical capacity assumes both roasters run every hour of the year, 8,760 hours, giving $273.97 an hour. Nobody can achieve it, since roasters need cleaning, maintenance and changeovers.

Practical capacity allows for that unavoidable downtime: 6,000 hours, giving $400.00 an hour.

Normal capacity utilization, the average use over the past three years, is 5,100 hours, giving $470.59 an hour.

Budgeted capacity utilization for this year is 4,800 hours, giving $500.00 an hour.

The choice matters because the rate becomes part of every pound's cost, and a higher rate makes products look more expensive precisely when volume is low. Practical capacity is the best denominator for costing and pricing, since products then bear the cost of hours they actually occupy, while the remainder is reported on its own line (Datar & Rajan, 2021).

Part 2: Showing the Idle Capacity

At the practical rate, the 4,800 budgeted hours absorb $1,920,000 into product costs. The remaining $480,000, 1,200 idle hours at $400, appears as a separate line, cost of unused capacity, rather than being spread over every pound roasted (Kaplan & Cooper, 1998).

Charging products for empty roaster hours would raise every pound's cost by $100 an hour of roasting and invite managers to raise prices when demand is weak, which drives more volume away and leaves even more capacity idle.

What this part is doingThe highlighted sentence explains the death spiral the practical denominator avoids, the key insight graders look for in this worksheet.

Part 3: The Seasonal Split

The year is not uniform. From August to December, holiday baking and gift-pack orders fill the roasters: the 2,500 practical hours in those months are fully used, and orders for 400 more hours cannot be met. From January to July, 3,500 practical hours are available and only 2,300 are used, so all 1,200 idle hours fall in the slow months.

The annual idle figure therefore hides two different problems. In spring, capacity is wasted. In fall, it is short.

Part 4: Options for the Fall Overrun

Three options were costed for the 400 hours of fall orders. First, outsource to a toll roaster at $520 an hour of equivalent output, $208,000, keeping the orders and their contribution of about $310,000. Second, move the roasters' annual deep maintenance, now scheduled in October, to March, freeing 160 fall hours at no cost, and outsource the remaining 240 hours for $124,800. Third, refuse the orders and lose the contribution.

The second option is best. It uses the idle spring capacity for work that has to happen anyway and cuts outsourcing cost by $83,200.

Commentary: Who Should Carry the $480,000

The idle cost is a result of the company's decision to own two roasters sized for the fall peak. It should be reported at the division level as the cost of seasonal capacity, not charged to the products that happen to run in spring. Managers can then see what the peak costs and decide whether a smaller roaster plus fall toll roasting would serve better (Hilton & Platt, 2020).

What this part is doingEnding on who carries the idle cost connects the costing choice to a capacity decision.

References

Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.

Hilton, R. W., & Platt, D. E. (2020). Managerial accounting: Creating value in a dynamic business environment (12th ed.). McGraw Hill.

Kaplan, R. S., & Cooper, R. (1998). Cost and effect: Using integrated cost systems to drive profitability and performance. Harvard Business School Press.

AC505 Unit 6 instructions, in plain terms

Unit 6 of AC505 asks you to analyze capacity and the cost of unused capacity. Compute the fixed cost rate under theoretical, practical, normal and budgeted capacity, and explain what each denominator means and its effect on product costs. Recommend a denominator for costing and pricing, with reasons. Show the cost of unused capacity as a separate amount. Then look beyond the annual figure to timing, such as seasonal peaks and troughs, and identify periods of shortage as well as waste. Cost the options for meeting peak demand, including rescheduling work into slack periods. Finish by deciding who should carry the cost of unused capacity and how it should be reported so managers can act on it. Reference two cost textbooks and Kaplan and Cooper's work on cost systems in APA 7.

How the AC 505 Unit 6 example is put together

Part one of the sample computes four rates from 8,760, 6,000, 5,100 and 4,800 hours and explains each denominator. Part two absorbs $1,920,000 into products at the practical rate and reports $480,000 of unused capacity separately, citing Kaplan and Cooper. The highlighted sentence explains how charging idle hours to products starts a downward spiral of rising prices and falling volume. Part three splits the year into a full fall season, short by 400 hours, and a spring with all 1,200 idle hours. Part four costs toll roasting, rescheduling maintenance plus toll roasting, and refusing orders, choosing the second at an $83,200 saving. The commentary assigns idle cost to the division's seasonal capacity decision.

Reading the AC505 Unit 6 grading rubric

Capacity worksheets in AC505 earn points for correct rates, a well-argued choice of denominator and separate reporting of unused capacity. Graders check each rate and the idle cost calculation. The rubric rewards explaining why practical capacity avoids distorting product costs and pricing, and recognizing the downward spiral that budgeted denominators can cause. Analyzing timing, not only annual totals, earns significant credit, especially when the student finds shortage and waste in the same year. Costed options for peak demand and a clear view of who should bear idle cost show managerial judgment. Worksheets that spread idle cost over products without comment, or ignore seasonality, lose credit. APA 7 references support the analysis.

AC505 Unit 6 help from the desk

Weak Unit 6 worksheets compute four rates and never say which to use or why. Idle capacity is folded into product costs, hiding it from managers. The annual average conceals a seasonal shortage, so the fall overrun goes unaddressed. Options for meeting peak demand are not costed, or rescheduling into slack months is not considered. The question of who carries idle cost is skipped, leaving no one accountable. If your section's case involves a different constrained resource, such as operating rooms or delivery trucks, a writer can build the rates, idle cost and options for that resource.

Get an AC505 Unit 6 example written to your instructions

Are the idle hours real, and whose are they? With the Unit 6 capacity figures, the fixed cost pool, budgeted and actual activity, any product data for a busy period and the rubric, the worksheet comes back in 24-48h computing each denominator, assigning idle cost to an owner and ranking the constraint. First samples cost nothing. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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AC505 Unit 6 questions, answered

Why use practical capacity rather than budgeted volume?

Practical capacity is what the resources can actually deliver after allowances for maintenance and setups, independent of how much demand shows up. Dividing by it keeps product costs stable and reports idle time as its own line. Budgeted volume spreads idle cost across the units made, so costs rise when demand falls, which can push prices up at the worst moment.

What is throughput in the theory of constraints?

Revenue minus truly variable costs, usually materials and anything else that changes directly with each unit. When one resource limits output, products are ranked by throughput per unit of that resource, here per roaster hour. A product with the best margin per pound can rank last if it moves through the constraint slowly, which is exactly what happens to cashews.

Should unused capacity cost ever be charged to a product?

Rarely, and only when a product line caused the capacity to be held, such as a dedicated line kept for one customer's contract. Otherwise it belongs to whoever decided to buy or keep the capacity. Charging it to products makes them look more expensive in slow periods and hides from executives what their capacity decisions are costing.

Where can I find a free AC505 Unit 6 sample paper?

This page holds a full AC505 Unit 6 capacity analysis worksheet for two roasters at Harrow Creek Nut Company with four denominators, $480,000 of unused capacity, a seasonal split, options and APA 7 references.

Why move the roasters' maintenance to March?

Because October maintenance takes 160 hours out of the busiest season while spring hours sit idle. Moving it frees fall capacity at no cost and cuts the toll roasting needed for the overrun by $83,200.