Overhead application rates allow overhead to be assigned as units are being produced throughout the accounting period.

Question

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Overhead application rates are used to allocate indirect costs to products or services based on a predetermined rate. This rate is usually determined at the beginning of the accounting period and applied throughout the period as units are produced. Thus, overhead can be assigned to units as they are being produced instead of waiting until the end of the period.

Overhead Application Rates Allow Overhead to Be Assigned as Units