Why Is the Absorption Rate Based on an Estimate and Not

question 2

Multiple Choice

Why is the absorption rate based on an estimate and not actual overhead costs?

• A) Absorption rates are used only for budgeting purposes
• B) Using actual rates is too late for many decisions, such as pricing products.
• C) Calculation of actual rates is too time-consuming.
• D) Absorption costing is a management accounting technique, not a financial accounting one.

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Definitions:

Assessing The Performance

The process of evaluating the efficiency, effectiveness, and productivity of an individual or organization's work.

Pay Increases

Adjustments made to employees' salaries to reward performance, match inflation, or position the company competitively in the job market.

360-Degree Appraisals

A feedback method in which an employee's performance is evaluated by a variety of people including supervisors, peers, and direct reports, often including a self-assessment.

Self-Evaluations

The process by which individuals assess and reflect upon their own performance, abilities, and qualities.