The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as:
A)actual hours * a predetermined (standard)overhead rate.
B)standard hours * a predetermined (standard)overhead rate.
C)actual hours * an actual overhead rate.
D)standard hours * an actual overhead rate.
E)$0,because users of standard costing do not apply overhead to work in process.

Question

Quizplus · Accepted Answer

Manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing is computed using a predetermined (standard) overhead rate and standard hours of production. This is because standard costing is based on predetermined costs, which include a standard overhead rate, rather than actual costs or actual hours worked. Therefore, the correct formula is standard hours x predetermined (standard) overhead rate.

The Manufacturing Overhead Applied to Work-In-Process Inventory by a Company