Question

Which of the following is true of normal costing?

a.Actual direct materials cost is traced to products, but estimated direct labor and estimated overhead costs are assigned using predetermined rates.

b.Actual direct materials, actual direct labor, and actual overhead cost are assigned to products.

c.Actual direct labor cost is traced to products, but estimated direct materials and estimated overhead costs are assigned using predetermined rates.

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

e.All manufacturing costs are assigned using predetermined rates.

Answer 1

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

Explanation-

Normal costing is cost allocation method that assigns costs to products based on the materials, labor, and manufacturing overhead used to produce them. Under normal costing approach , the product cost includes the follwing components

1.Actual cost of direct materials

2.Actual cost of labor

3.Assigned manufacturing overhead based on a predetermined overhead rate