Question

Which of the following is true of normal costing? a.Actual direct labor cost is traced to products, but estimated direct materials and estimated overhead costs are assigned using predetermined rates. b.Actual direct materials cost is traced to products, but estimated direct labor and estimated overhead costs are assigned using predetermined rates. c.Actual direct materials and direct labor costs are traced to products, but estimated overhead costs are assigned using predetermined rates. d.Actual direct materials, actual direct labor, and actual overhead cost are assigned to products.

Answer 1

C) Actual direct materials and direct labor costs are traced to products, but estimated overhead costs are assigned using predetermined rates.

What Are the Normal Costs?

The cost of a product is determined using standard costing. This method includes a standard overhead rate and actual direct costs applied to a product. It includes the actual cost of labor, materials, and a standard overhead rate that is calculated based on the product's actual consumption of the allocation base in question (such as direct labor hours or machine time).

You can prorate the difference between the cost of goods sold and inventory if there is a discrepancy between the standard overhead cost and the actual overhead cost, or you can charge the difference to the cost of goods sold (for lesser discrepancies).

Learn more about the costs of the product with the help of the given link:

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