A reason for keeping a constant denominator activity level is to maintain stability in the amount of overhead cost that is applied to each unit of product manufactured over the period.

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Keeping a constant denominator activity level ensures that the overhead cost applied to each unit of product remains stable, which helps in maintaining consistency in the product costing and profitability analysis over time. This is because the overhead cost is allocated and applied to the products based on a predetermined denominator level, such as labor hours or machine hours, which is assumed to remain constant even as the actual level of activity fluctuates. Therefore, by using a constant denominator activity level, the business can better plan and control its overhead costs and thus enhance its overall financial performance.

A Reason for Keeping a Constant Denominator Activity Level Is