When we use an annual overhead rate consistently throughout the year for product costing,without altering it month to month,this is called a(n)________.
A) direct costing system
B) absorption costing system
C) normal costing system
D) constant costing system

Question

Quizplus · Accepted Answer

Using a consistent annual overhead rate throughout the year is characteristic of a normal costing system. In a normal costing system, actual costs are tracked and then applied to products using predetermined overhead rates, which are calculated based on estimated overhead costs and a measure of activity such as direct labor hours or machine hours. This allows for more accurate product costing and helps to smooth out any seasonal fluctuations in overhead costs. Direct costing and absorption costing are different methods of assigning overhead costs, and a constant costing system is not a recognized term in accounting.

When We Use an Annual Overhead Rate Consistently Throughout the Year