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What is a normal costing system?
Normal costing system is related to cost allocation assign to a product/item. It consists of viz. material cost, direct labour & factory overhead (i.e. to the extend that can be directly attributed to the product).
Normal costing is used to value manufactured products with the actual materials costs, the actual direct labor costs, and manufacturing overhead based on a predetermined manufacturing overhead rate. These three costs are referred to as product costs and are used for the cost of goods sold and for inventory valuation.