Actual, normal and standard costing

in an actual cost system all costs are recorded at actual amounts. This method is simple but it requires waiting until the expense has been incurred, which is often too late to take timely actions.

In a normal cost system, direct costs are recorded at actual amounts, but manufacturing overhead are applied based on quantities of consumed and a predetermined overhead rate.

In a standard cost system, all costs are applied to product and services based on preset standards.

  • explain the differences between actual, normal and standard costing;


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