Under a standard costing system, manufacturing overhead costs are applied to work in process on the basis of
A)actual hours worked.
B)standard hours allowed.
C)ratio of actual variable to fixed costs.
D)actual overhead costs incurred.

Question

Quizplus · Accepted Answer

Under a standard costing system, manufacturing overhead costs are applied to work in process on the basis of standard hours allowed. This means that an estimated overhead rate is calculated based on the budgeted manufacturing overhead costs for the period and the budgeted amount of activity (usually direct labor hours or machine hours). This rate is then applied to the actual amount of activity (direct labor hours or machine hours) for each job or product to determine the amount of manufacturing overhead costs to be allocated to each.

Under a Standard Costing System, Manufacturing Overhead Costs Are Applied