Which of the Following Statements About Normal Costing Is True

question 9

Multiple Choice

Which of the following statements about normal costing is true?

• A) Direct costs and indirect costs are traced using an actual rate.
• B) Direct costs and indirect costs are traced using budgeted rates.
• C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate.
• D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.

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Definitions:

Prepaid Expense

An expense that has been paid in advance and is recorded as an asset until it is actually incurred.

Unearned Revenue

Unearned revenue refers to payment received for goods or services that have not yet been delivered or rendered. It is recorded as a liability on the balance sheet until the transaction is completed.

Accrued Expense

Expenses that have been incurred but not yet paid for, recognized in the accounting periods they are incurred rather than when cash changes hands.

Unearned Revenue

Income received by a company for goods or services that have not yet been delivered or performed; it is recorded as a liability on the balance sheet until the goods or services are provided.