Understanding Normal Costing and its Relationship to Overhead Allocation

The video tutorial explains normal costing, a method of allocating costs to products, focusing on overhead. It introduces the concept of a derived overhead rate, which helps smooth expenses and avoid cost spikes. The tutorial details how to calculate the normal costing rate by determining the overhead rate and using an allocation base. It concludes with a summary of how these calculations apply to product costing.

Explain how using a derived overhead rate can benefit a company.

In what ways can the allocation base be determined for calculating normal costing?