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

Question

Quizplus · Accepted Answer

Standard costing systems apply manufacturing overhead to Work-in-Process Inventory based on the standard hours allowed for the actual output produced multiplied by the predetermined (standard) overhead rate. This method facilitates variance analysis by comparing the standard costs to actual costs.

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