Question

The approach used when overhead is applied to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs is called.

Answer 1

A method of costing whereby overhead costs are allocated to a job by multiplying the actual cost of the allocation base incurred by the job by a specified overhead rate is known as Normal Costing.

What is predetermined overhead rate?

An allocation rate known as the predetermined overhead rate allocates a specific amount of manufacturing overhead to job orders or goods.

Predetermined overhead is frequently calculated at the start of each reporting period by dividing the anticipated manufacturing overhead expenses by an allocation base.

The allocation base refers to the time taken to perform an activity such as the machine hours, direct labor hours etc.

Normal Costing also known as the product costing method in which the several cost such as the direct cost, material cost, manufacturing overhead cost as well as the work in progress is added.

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