Briefly describe the procedures that are used to apply manufacturing overhead to production for companies that use (1) normal costing systems and (2) those that use standard costing systems.
What will be an ideal response?
In a normal costing system, overhead is applied to the Work-in-Process Inventory account as follows (assuming hours as an application base): actual hours × predetermined overhead rate. The actual hours represent the actual time consumed in processing the actual number of units produced (both completed and those in production). A similar procedure is followed in a standard costing system except that the predetermined rate is multiplied by the standard hours allowed (i.e., the actual production × the standard time per unit).
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