Answer (A) is correct . The larger the denominator in the overhead application rate, the smaller the rate and the lower the cost assigned to the product. Theoretical capacity, which is the absolute capacity during continuous operations, ignoring holidays, maintenance time, etc., provides the largest denominator in the ratio.
Answer (B) is incorrect because Normal volume is less than theoretical capacity.
Answer (C) is incorrect because Practical capacity is theoretical capacity adjusted downward for holidays, maintenance time, etc.
Answer (D) is incorrect because Minimum volume relates to the lowest production level that would be required to operate a particular function and would result in the largest amount of applied overhead.
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