If a Company Multiplies Its Actual Overhead Rate by the Actual

question 116

Multiple Choice

If a company multiplies its actual overhead rate by the actual activity level of its allocation base, it is using:

• A) standard costing.
• B) normal costing.
• C) actual costing.
• D) budget costing.

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Definitions:

Standard Quantity

The estimated amount of materials or resources expected to be used during a production process under normal conditions.

Direct Materials

Raw materials that can be directly attributed to the production of specific goods or services.

Allowances For Spoilage

Financial adjustments made for the anticipated loss of goods due to spoilage during production or storage.

Inefficiency

The lack of ability or effectiveness to transform inputs into outputs in a cost-effective manner, often resulting in wasted resources.