Answer (B) is correct . Annual overhead application rates smooth seasonal variability of overhead costs and activity levels. If overhead were applied to the product as incurred, the overhead rate per unit in most cases would vary considerably from week to week or month to month. The purpose of an annual overhead application rate is to simulate constant overhead throughout the year.
Answer (A) is incorrect because Overhead must be budgeted before a rate can be calculated.
Answer (C) is incorrect because Overhead application rates are used to smooth seasonal variability of overhead costs.
Answer (D) is incorrect because An overhead rate applies overhead to the product.
|
