Which of the following statements is/are correct concerning the application of overhead in a standard costing system driven by process hours?
A)A predetermined overhead rate is allowed only for ﬁxed overhead.
B)Overhead application is based on standard process hours allowed.
C)Overhead application is based on actual process hours incurred.
D)Only prime costs are considered to be product costs in a standard costing system.
E)Only variable overhead costs are applied to production.

Question

Quizplus · Accepted Answer

In a standard costing system driven by process hours, overhead application is based on standard process hours allowed. This means that a predetermined overhead rate is used for both fixed and variable overhead, and this rate is multiplied by the standard number of process hours allowed for each unit of production. This allows for a more accurate allocation of overhead costs to products based on the activities required to produce them. Option A is incorrect because a predetermined overhead rate is used for both fixed and variable overhead. Option C is incorrect because actual process hours incurred may vary from the standard and could lead to over- or under-application of overhead costs. Option D is incorrect because both direct materials and direct labor are considered to be product costs in a standard costing system. Option E is incorrect because both fixed and variable overhead costs are usually applied to production in a standard costing system.

Which of the Following Statements Is/are Correct Concerning the Application