A normal costing system uses actual costs for direct materials and direct labor, and:

Question

Quizplus · Accepted Answer

Normal costing systems use estimated factory overhead costs rather than actual costs. This is because factory overhead costs (such as rent, utilities, and depreciation) are not as easily traced to specific products or jobs as direct materials and labor costs are. Therefore, estimated factory overhead costs are used to apply overhead to products or jobs based on a predetermined overhead rate.

A Normal Costing System Uses Actual Costs for Direct Materials