A normal costing system uses the following _____.
A)actual direct material, actual direct labor, and actual overhead
B)actual direct material, actual direct labor, and applied overhead
C)actual direct material, applied direct labor, and actual overhead
D)applied direct material, applied direct labor, and actual overhead

Question

Quizplus · Accepted Answer

A normal costing system uses actual direct material and actual direct labor, and applies overhead based on a predetermined overhead rate. Therefore, option B - actual direct material, actual direct labor, and applied overhead - is the correct answer. Option A (actual direct material, actual direct labor, and actual overhead) is not commonly used in normal costing because actual overhead costs can vary and do not reflect the predetermined overhead rate used in the system. Option C (actual direct material, applied direct labor, and actual overhead) is not accurate because direct labor is typically applied based on a predetermined rate, not based on actual labor costs. Option D (applied direct material, applied direct labor, and actual overhead) is not accurate because the system requires the use of actual direct material and labor costs in addition to overhead application.

A Normal Costing System Uses the Following _____