The effect of uniform production levels on unit production costs can be achieved
A)by using a factory overhead rate based on long-run normal production activity level.
B)by using a factory overhead rate based on selling price.
C)by closing the factory overhead at the end of the accounting period.
D)by using a factory overhead rate based on different production levels for each year.

Question

Quizplus · Accepted Answer

Using a factory overhead rate based on long-run normal production activity level helps to spread out fixed costs over a larger number of units, resulting in lower unit production costs. This assumes that production levels remain relatively stable and that the long-run normal production activity level is an accurate reflection of future production levels. Using a factory overhead rate based on selling price or different production levels for each year may not accurately reflect the actual overhead costs incurred in producing the units, and closing the factory overhead at the end of the accounting period does not address the issue of uniform production levels.

The Effect of Uniform Production Levels on Unit Production Costs