ECONOMICS

Detailed explanation-1: -In normal costing; total product cost taking into account are the actual cost of direct materials used, the actual cost of direct labour incurred and the cost of manufacturing overhead applied.

Detailed explanation-2: -Applied overhead is the amount that is added to jobs as work is completed. This is done during the year as work is completed using the predetermined overhead rate and actual activity. Actual overhead is the amount of overhead cost that the company actually incurred.

Detailed explanation-3: -As their names indicate, direct material and direct labor costs are directly traceable to the products being manufactured. Manufacturing overhead, however, consists of indirect factory-related costs and as such must be divided up and allocated to each unit produced.

Detailed explanation-4: -When performing actual costing, businesses often record the actual costs of materials, labor and overhead related to the production process. They may use these factors to calculate the total and per-unit costs of manufacturing the product during a specified accounting period.

Detailed explanation-5: -In order to know the manufacturing overhead cost to make one unit, divide the total manufacturing overhead by the number of units produced. The total manufacturing overhead of $50, 000 divided by 10, 000 units produced is $5.