The effect of uniform production levels on unit production costs can be achieved

Question

Quizplus · Accepted Answer

Using a factory overhead rate based on long-run normal production activity level ensures that the production costs are allocated evenly across all units produced, regardless of the production level. This helps to achieve uniform production levels and level out unit production costs. Option A is incorrect because using different production levels for each year will not ensure uniformity in production levels. Option B is also incorrect because basing the factory overhead rate on selling price may not be a reliable indicator of production costs. Option C is irrelevant as closing the factory overhead at the end of the accounting period has no bearing on achieving uniform production levels.

The Effect of Uniform Production Levels on Unit Production Costs