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Social Science Clinic => Accounting => Topic started by: ahunt13 on Feb 5, 2023

Title: Answer the following questions regarding costing systems.a.What is the difference between a normal ...
Post by: ahunt13 on Feb 5, 2023

Answer the following questions regarding costing systems.

a.	What is the difference between a normal costing system and a standard costing

system?

b.	What adjustments are required at the end of each period for each?

c.	What is an advantage of standard costing?

d.	Are inventory and cost of goods sold accounts reported on financial statements at

actual cost or standard cost?

Title: Answer the following questions regarding costing systems.a.What is the difference between a normal ...
Post by: Tester on Feb 5, 2023

a.	When using a normal costing system, direct materials and direct labor are recorded at

actual cost and overhead is applied to products using a predetermined overhead rate. When using a standard costing system, all product costs are recorded at standard cost as the products are being made.

b.	When using a normal costing system, only over- or under-applied overhead cost needs

to be adjusted to the actual overhead cost at the end of the period. When using a standard costing system, the balances in all inventory and costs of goods sold accounts will be at standard amounts at the end of an accounting period. Companies make adjustments to the recorded balances through a series of journal entries to change amounts reported on financial statements from standard cost to actual cost.

c.	The advantage of standard costing is that it gives visibility to the variances that arise

in the production process. Because variances must be recorded and closed to Cost of Goods Sold, the impact of not achieving standards becomes unavoidably clear to managers.

d.	Inventory and cost of goods sold accounts must be reported on financial statements at

actual cost rather than standard cost.