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

question 24

Multiple Choice

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.

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Definitions:

Activity-Based Costing

A costing technique that determines the cost of a product based on the activities involved in its production and the extent to which the product uses those activities.

Manufacturing Overhead

Costs related to the production process that are not directly tied to the product, such as rent for the manufacturing space, utility costs, and salaries for manufacturing management.

Traditional Costing System

A costing method that assigns manufacturing overhead costs to products based on volume metrics such as machine hours or labour hours.

Direct Labor-Hours

The entirety of hours committed by personnel directly involved in the process of production.