Process costing is used when there is mass production of nearly identical units and cost of each individual unit cannot be segregated from each other. Under process costing method, the cost is accumulated over a period of time and thereafter the cost is allocated to the units produced during that period of time to individual unit on similar basis. Over-applied overheads means when applied overheads are more than the actual manufacturing overheads incurred then it is known over-applied overheads. Under-applied overheads means when applied overheads are less than the actual overheads incurred then it is known under-applied overheads. To determine: We have to determine that whether in process costing also, the actual manufacturing overheads incurred will be equal to applied overheads or actual overheads incurred can be more than applied overheads or vice versa.

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Chapter 20, Problem 11DQ

To determine

Process costing is used when there is mass production of nearly identical units and cost of each individual unit cannot be segregated from each other. Under process costing method, the cost is accumulated over a period of time and thereafter the cost is allocated to the units produced during that period of time to individual unit on similar basis.

Over-applied overheads means when applied overheads are more than the actual manufacturing overheads incurred then it is known over-applied overheads.

Under-applied overheads means when applied overheads are less than the actual overheads incurred then it is known under-applied overheads.

To determine:

We have to determine that whether in process costing also, the actual manufacturing overheads incurred will be equal to applied overheads or actual overheads incurred can be more than applied overheads or vice versa.

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