Question

Which of the following statements is true of an actual cost system?

a.It uses predetermined direct materials cost, predetermined direct labor cost, and actual overhead costs.
b.It uses predetermined direct materials, direct labor, and overhead costs.
c.It measures overhead costs on a predetermined basis and uses actual costs for direct materials and direct labor.
d.It measures costs of direct materials on a predetermined basis and uses actual costs for direct labor and overhead.

Answer 1

The true statement about an actual cost system is that it measures overhead costs on a predetermined basis and uses actual costs for direct materials and direct labor.

Step-by-step explanation:

Which of the following statements is true of an actual cost system? The correct answer is: it measures overhead costs on a predetermined basis and uses actual costs for direct materials and direct labor. Actual cost systems differ from standard cost systems. An actual cost system charges actual costs to the product while a standard cost system charges costs based on pre-determined cost rates and standards. In actual cost accounting, both variable costs and fixed costs for materials, labor, and overhead are recorded as they occur. Variable costs, such as labor and raw materials, tend to fluctuate with the level of output. These costs are recorded at their actual amounts in an actual cost system. Fixed costs, such as rent for a facility, usually do not change with the level of production and can sometimes be calculated on a predetermined basis in the context of allocating overheads.