The advantage of using normal costing instead of actual costing is ________.
A) indirect costs are assigned at the end of the year when they are known
B) the job cost is more accurate under normal costing
C) indirect costs are assigned to a job on a timely basis
D) normal costing provides a higher gross profit margin

Question

Quizplus · Accepted Answer

Normal costing assigns indirect costs to a job on a timely basis, allowing for better cost control and decision making throughout the year. Actual costing may not assign indirect costs until the end of the year when they are known, which can make it difficult to track costs and make adjustments as needed. The accuracy of the job cost under normal costing depends on the accuracy of the predetermined overhead rate used to allocate indirect costs, whereas actual costing uses the actual indirect costs incurred during production. There is no inherent advantage of normal costing over actual costing in terms of gross profit margin.

The Advantage of Using Normal Costing Instead of Actual Costing