Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

2. Transaction Analysis

Journal Entries: Debits and Credits

Financial Accounting

2. Transaction Analysis

Journal Entries: Debits and Credits

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Multiple Choice

A normal cost system assigns overhead to jobs using which of the following methods?

A predetermined overhead rate

Direct labor hours only

Actual overhead costs incurred

Estimated direct material costs

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Verified step by step guidance

Understand the concept of a normal cost system: A normal cost system assigns overhead to jobs based on a predetermined overhead rate rather than actual overhead costs incurred.

Recognize the purpose of a predetermined overhead rate: It is used to allocate overhead costs to jobs in a systematic and consistent manner, based on an estimated rate calculated before the accounting period begins.

Learn how the predetermined overhead rate is calculated: The formula is:

\frac{Estimated Overhead Costs}{Estimated Activity Base}

. The activity base could be direct labor hours, machine hours, or another cost driver.

Evaluate the options provided in the problem: Direct labor hours only, actual overhead costs incurred, and estimated direct material costs. Note that actual overhead costs incurred are not used in a normal cost system, and estimated direct material costs are not typically the basis for overhead allocation.

Conclude that the correct method for assigning overhead in a normal cost system is using a predetermined overhead rate, which is based on an estimated activity base such as direct labor hours or machine hours.