What Is the Rationale Behind Applying Overhead at an Estimated

question 11

Multiple Choice

What is the rationale behind applying overhead at an estimated rate rather than an actual rate such as direct labour or materials?

• A)Accounting rules permit this approach.
• B)Waiting to the end of an accounting period to allocate costs is inefficient.
• C)Overhead costs fluctuate widely month to month and these fluctuations can distort profitability.
• D)Overhead costs are incurred evenly month to month as they include mostly fixed costs.

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