For normal costing, even though the budgeted indirect-cost rate is based on estimates, indirect costs are allocated to products based on actual levels of the cost-allocation base.

Question

Quizplus · Accepted Answer

Normal costing allocates indirect costs based on a budgeted indirect-cost rate, but the rate is calculated using estimates of indirect costs and the expected level of the cost-allocation base. However, the actual indirect costs are allocated to products based on the actual level of the cost-allocation base, which should be determined at the end of the period. This allows for a more accurate allocation of indirect costs to products.

For Normal Costing, Even Though the Budgeted Indirect-Cost Rate Is