General Studies · Cost Accounting
Which of the following is a primary advantage of using a predetermined overhead absorption rate?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It avoids fluctuations in unit costs caused by abnormally high or low overhead expenditure or activity levels.✓
- 2It completely eliminates the possibility of under/over absorption of overheads.
- 3It removes the need to select an appropriate absorption base.
- 4It ensures that actual overhead costs exactly match absorbed overhead costs.
Correct answer
It avoids fluctuations in unit costs caused by abnormally high or low overhead expenditure or activity levels.
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