Question

cannot be used as
base for the determination of
overhead absorption rate?​

Answer 1

Explanation:

Absorption of Overheads: Definition, Bases and Methods

The overhead to be absorbed by a cost unit is computed with reference to two factors:

These bases are:

Selection of Base:

Direct labour hour basis:

Machine hour rate:

Direct Material:

Though this method is simple and easy to understand and apply, it suffers from the following disadvantages:

Direct Wages: