What is meant by normal capacity in the context of a standard cost environment? If we are over or under$-$absorbed in fixed overhead, GAAP requires us to balance sheet those variances. Do we need to include a normal capacity adjustment in our calculation? We are standard cost and a seasonal business so we have a lot of volatility in absorption if we just set one standard for the full year. Currently we balance sheet ALL variances and then amortize them based on a high level months of supply calculation. I wonder if there is a better way to do this.