Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate?
A)expected annual
B)normal
C)theoretical
D)prior year

Question

Quizplus · Accepted Answer

Expected annual capacity is used to compute the fixed overhead application rate because it represents the level of activity that the company expects to achieve in the coming year. This level of activity is used to calculate the fixed overhead rate because it is the level of activity that the company will use to absorb its fixed overhead costs.

Which of the Following Capacity Levels Has Traditionally Been Used