Under AS 2, fixed production overheads are allocated to units of production on the basis of which capacity?

1. AS 2 requires fixed production overheads to be absorbed systematically. 2. The allocation base is the normal capacity of the production facilities. 3. Using actual or maximum capacity could distort the per-unit overhead in low-output periods. _Source: ICAI BoS CA Intermediate Paper 1 (Advanced Accounting), Sept 2025 — Q.1(b), AS 2 Valuation of Inventories._