When using normal costing, the total production cost of a job is composed of:
A) direct material and direct labor.
B) direct material, direct labor, manufacturing overhead, and outlays for selling costs.
C) direct material, direct labor, manufacturing overhead, and outlays for both selling and administrative costs.
D) direct material, direct labor, and applied manufacturing overhead.
E) direct material, direct labor, and actual manufacturing overhead.

Question

Quizplus · Accepted Answer

Normal costing includes direct material, direct labor, and applied manufacturing overhead. This is because manufacturing overhead is a fixed cost that is necessary for production, but cannot be directly traced to a specific product, so it is allocated based on a predetermined overhead rate. Outlays for selling and administrative costs are not included in the total production cost of a job. Actual manufacturing overhead may be used in some costing systems, but not in normal costing.

When Using Normal Costing, the Total Production Cost of a Job