The two underlying reasons that managers use longer time periods,such as a year,to calculate indirect-cost rates are:

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The numerator reason refers to the stability of the indirect-cost rate over time, aiming for a smoother, more predictable rate that doesn't fluctuate wildly with seasonal or other variations in activity levels. The denominator reason involves the practicality of measuring the actual base (e.g., direct labor hours, machine hours) across which the indirect costs are allocated. Using longer periods helps in averaging out these fluctuations and provides a more stable and accurate cost allocation base.

The Two Underlying Reasons That Managers Use Longer Time Periods,such