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.

Question

Quizplus · Accepted Answer

Using actual overhead costs would delay decision-making processes, such as pricing, because actual costs are only known after the period ends.

Why Is the Absorption Rate Based on an Estimate and Not