In a standard cost system,overhead is applied to production on a basis of
A)the denominator hours chosen for the period.
B)the budgeted hours for the normal production level of activity.
C)the actual hours required to complete the output of the period.
D)the standard hours allowed to complete the output of the period.

Question

Quizplus · Accepted Answer

In a standard cost system, overhead is applied based on the standard hours allowed to complete the output of the period. This is because the standard hours represent the expected time it should take to produce the output at the normal level of efficiency, and therefore should include the expected amount of overhead costs. Applying overhead based on actual hours or budgeted hours would not accurately reflect the expected amount of overhead costs for the output. Applying overhead based on denominator hours, which represent the total time available for production, would also not be an accurate reflection of the expected amount of overhead costs for the output.

In a Standard Cost System,overhead Is Applied to Production on a Basis