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    Indirect cost calculation &allocation,Normal vs actual cost

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    1. Explain how a budgeted indirect-cost rate is determined.

    2. What is the difference between an actual cost system and a normal cost system?

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    Solution Preview

    Budgeted indirect-cost rate & actual and normal cost system (questions)
    1. Explain how a budgeted indirect-cost rate is determined.

    2. What is the difference between an actual cost system and a normal cost system?

    1. Explain how a budgeted indirect-cost rate is determined.

    Indirect costs are those costs which cannot be directly allocated to the units produced. Examples of indirect costs are:
    1. Salary of the administration personnel
    2. Salary of accounting personnel.
    3. Contribution to welfare plans
    4. Drinking water and sanitation expenses
    5. Fire protection expenses
    6. General clean up expenses.
    7. Insurance
    8. Legal ...

    Solution Summary

    The solution describes the meaning of indirect cost ,examples of indirect cost, steps in allocation of indirect cost, meaning of actual cost and normal cost and their differences.

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