Normal costing and Actual costing

What is the best description of overheads?

• Indirect costs which are not easily identifiable in a product

• Indirect costs which are easily identifiable in a product

• Direct costs which are not easily identifiable in a product

• Direct costs which are easily identifiable in a product

Which is not true about predetermined overhead rate?

• It is the rate used to apply manufacturing overhead to work-in-process inventory

• It is calculated before the production begins.

• It always fluctuates from time to time.

• It is calculated based on either direct labour cost, direct material cost, direct labour hours, machine hours or production units.

Predetermined overhead rate (based on direct labor cost) =

• (budgeted manufacturing cost/budgeted production) x 100%

• (budgeted manufacturing overhead cost/budgeted direct labour cost) x 100%

• (budgeted manufacturing cost/budgeted direct labour cost) x 100%

• (budgeted manufacturing cost/budgeted direct material cost) x 100%

Which elements need to be journalized? (more than 1 answer)

• predetermined overhead rate

• actual manufacturing overhead cost

• budgeted manufacturing overhead cost

• applied manufacturing overhead cost

The adjustment of manufacturing overhead cost is under-applied..

• Debit the manufacturing overhead account ; Debit the cost of goods sold account

• Debit the cost of goods sold account ; Credit the manufacturing overhead account

• Credit the manufacturing overhead account ; Credit the cost of goods sold account

• Credit the cost of goods sold account; Debit the manufacturing overhead account

Applied overhead concept refer to a (n) ________________

• amount of direct manufacturing cost actually involved in certain period of time

• plan manufacturing overhead cost

• budgeted manufacturing cost, because actual overhead cost is still unknown

• estimated overhead based on actual activity level

The advantage of normal costing compared to actual costing is

• The cost determined is more accurate

• Cost of product will be various at a certain period

• Normal costing is more appropriate for a reporting purposes

• Product price can be determined in advance before the production complete

The adjustments entry for under applied overhead are

• Dr Manufacturing Overhead ; Cr Cost Of Goods Sold

• Dr Applied Manufacturing Overhead ; Cr Cost Of Goods Sold

• Dr Cost Of Goods Sold; Cr Applied Manufacturing Overhead

• Dr Cost Of Goods Sold; Cr Manufacturing Overhead

Applied Manufacturing Overhead equals to __________

• Direct Materials + Direct Labour + Manufacturing Overhead

• Predetermined Overhead Rate (POR) X Actual Basis of Activity

• Predetermined Overhead Rate (POR) X Actual Manufacturing Overhead

• Predetermined Overhead Rate (POR) X Estimated Basis of Activity

In normal costing, how is factory overhead applied?

• • Based on actual overhead costs incurred during the period

• • Based on a predetermined overhead rate

• • Based on direct labor hours only

• • Based on direct material costs