Question

A job-order costing system that relies on normal costing will:

Multiple Choice

• Assign actual direct materials and direct labor costs to jobs.

• Apply overhead cost to jobs by multiplying an actual overhead rate by the estimated amount of the allocation base incurred by the jobs.

• Apply overhead cost to jobs by multiplying an actual overhead rate by the actual amount of the allocation base incurred by the jobs.

• Apply overhead cost to jobs by multiplying a predetermined overhead rate by the estimated amount of the allocation base incurred by the jobs.

Answer 1

A job-order costing system that relies on normal costing will:

Apply overhead cost to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs.

Explanation:

Normal costing bascally removes the problems associated with the actual costing. It uses a predertmined overhead rate based on the Bugeted overhead and the budgeted activity. This predetermined overhead rate is multiplied by the actual allocation base.

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