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WorksheetsNormal costing and Actual costing
Total questions: 15
Worksheet time: 8mins
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
Why is normal costing typically used by companies?
It is less accurate but easier to implement and track costs during the period
It gives a more accurate representation of actual costs
It requires constant adjustments to account for fluctuations in costs
It eliminates the need for estimating overhead costs
Which of the following is a disadvantage of using actual costing?
It is more difficult to track and calculate costs in real-time
It is more accurate than normal costing
It requires more estimation and forecasting than normal costing
It doesn't consider actual production data
Which of the following is an advantage of normal costing over actual costing?
It is more accurate in matching costs to production
It provides immediate cost information during the period
It requires fewer estimations
It results in fewer fluctuations in cost estimates
If a company uses normal costing, what would likely happen if the actual overhead costs are higher than expected?
The product cost will be overstated for the period.
The product cost will be understated for the period.
The product cost will not be affected at all.
There will be no impact on product costs, as normal costing is based only on direct materials and lab
Which of the following best describes the key difference between normal costing and actual costing?
Normal costing is based on estimates and simplifies the accounting process, while actual costing is based on actual costs and provides more precise cost data.
Normal costing uses actual data for labor and materials, while actual costing estimates overhead costs.
Normal costing is only used for large companies, and actual costing is for smaller businesses.
Actual costing applies overhead based on a fixed rate, while normal costing applies based on actual costs.
