COST ACCOUNTING
MANUFACTURING OVERHEAD
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The cost determined is more accurate
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Cost of product will be inconstant at a certain period
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Normal costing is more appropriate is for reporting purposes
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Product price can be determined in advance before the production complete
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Detailed explanation-1: -Normal costing allows team members to accurately set goals and meet specific targets for production rates and costs, as they have a per-unit overhead price that they can aim to meet. As you conduct actual costing calculations after producing products, it is more difficult to use in goal-setting.
Detailed explanation-2: -An advantage that normal costing has over actual costing is the ability to provide timely information on the amount of indirect cost incurred by a particular cost object.
Detailed explanation-3: -Comparing Normal Costing and Standard Costing The key difference between normal costing and standard costing is that normal costing employs actual costs for materials and direct labor, while standard costing uses predetermined costs for both of these items.
Detailed explanation-4: -Actual costing uses the real expenditures that were incurred in the production of a product or service. Extended normal costing uses the actual costs of direct materials and direct labor but relies on a budgeted figure for overhead costs.