Question

A normal job-order costing system is a system that determines unit cost by using: estimated costs for direct materials, direct labor, and overhead. O actual costs for direct materials and direct labor and estimated costs for overhead. O actual costs for direct materials and estimated costs for direct labor and overhead. actual costs for direct materials and overhead and estimated costs for direct labor.

Answer 1

*Option(B). Actual costs for direct materials and direct labor and estimated costs of overhead is the correct statement.

*Direct Material: The cost of any materials that is an integral part of the final product.

*The Separate account for each type of materials maintained in a subsidiary materials ledger. The details as to quantity and cost of materials received are recorded on real-time basis. Hence, Actual direct materials costs are taken for computation of job unit cost.

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*Direct labor: It includes the wages of each employee who is directly involved in converting materials into finished product.

*The amount of time spent by an employee in the factory is recorderd on clock cards. Then, It recordered to payroll ledger. The labor costs are automatically recorded to respective jobs when incurred. Hence, Actual direct labors costs are taken for computation of job unit cost.

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*Factory OH: It includes costs other than direct materials and direct labor costs that are incurred in the manufacturing process.

*It basically come from various sources. Ex: Indirect material; Indirect labor; Factory Power; Factory Depreciation;

*It is much difficult to identify related ti the jobs. However, We use Cost allocation, which is the process of assigning factory overhead costs to a respective jobs.

*The most appropriate basis are Direct labor hours; Direct labor costs; Machine Hours.

*We need to find predetermined OH rate. then, allocation should be done. The amount of fatory overhead applied to each job would be recorded in the job cost sheets.

*After finding actual factory overhead cost. if amount during the period will usually differs. Then, we adjust with over applied/under applied FOH. finally, it matches with actual factory overhead.

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