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tweb28 tweb28
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A month ago
What is the difference between a normal costing system and a standard costing system as it relates to the amounts at which costs are recorded, and how variances are accounted for?
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Managerial Accounting


Edition: 4th
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wellsarwellsar
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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. Variances are calculated at the end of a period by comparing recorded costs to the standard costs that should have been incurred.
When using a standard costing system, all product costs are recorded at standard cost as the products are being made. At the end of the period, the balances in all inventory and cost of goods sold accounts reflect standard amounts. Standard costing gives visibility to the variances. Companies make adjustments to the recorded balances through a series of journal entries using the variances.

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tweb28 Author
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Thank you, thank you, thank you!
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