Actual Costing
Accounting glossary · Understand, connect, apply
Actual costing assigns costs using actual direct costs and actual indirect-cost rates for the period.
Example
Actual factory overhead of 90,000 divided by 30,000 actual machine hours gives an overhead rate of 3 per machine hour.
Remember the difference
Actual costing differs from normal costing, which uses a predetermined overhead rate. Actual data can still contain errors or unrepresentative fluctuations.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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