The regular costs which are incurred by an entity in the normal conditions of operation. Normal cost consists of actual direct materials cost, actual labor cost and other direct expenses. Examples are costs of repairs and maintenance, as well as administrative expenses (such as salaries paid to employees).
Under normal costing, the normal costs of direct materials and direct labor are added to the estimated overhead costs to arrive at unit cost (per product). In turn, unit cost or product cost is the sum of prime costs and conversion costs.
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