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John Moffat.
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maximus07
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Sir can you please tell me how OAR in absorption costing avoids seasonality?
John Moffat
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What avoids seasonality is using a standard OAR calculated (usually) for the year.
Otherwise because each month the levels of production are likely to change due to seasonality, if an absorption rate was calculated each month separately it would keep changing and therefore the cost of production per unit would keep changing.
Instead we use one standard OAR for the year as a whole which avoids this problem.
maximus07
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