In normal costing, the situation in which the allocated amount of indirect cost is greater than the incurred cost, is considered as _____________?
Correct answer: B. over allocated indirect cost
- A. incurred indirect cost
- B. over allocated indirect cost
- C. applied indirect cost
- D. applied direct cost
Explanation
When applied or allocated overhead exceeds the actual indirect cost incurred, overhead is over-allocated, also called overapplied overhead. The comparison must be between applied indirect cost and incurred indirect cost.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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