A normal absorption costing system charges work in process with:
A) actual prime costs and actual overhead costs.
B) applied prime costs and all overhead costs using a budgeted rate.
C) actual prime costs and all overhead costs using a budgeted rate.
D) applied direct materials and all conversion costs using a budgeted rate.

Question

Quizplus · Accepted Answer

In a normal absorption costing system, actual prime costs (direct materials and direct labor) are charged to work in process, and all overhead costs are allocated using a budgeted rate. This method helps in assigning a portion of fixed manufacturing overhead to each unit of production, which is a requirement under GAAP for inventory valuation and cost of goods sold calculation.

A Normal Absorption Costing System Charges Work in Process With