a) Briefly explain how control over prime costs is achieved in job order costing system? . b) What is the function of work in process (WIP) account in job order costing system?
Answers
Answer:
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Explanation:
a) ans :
1.Measuring Direct Materials Cost in Job Order Costing System:At the beginning of production process a document known asbill of materialsis usedfor standard products. "A bill of materialsis a document that lists the type and quantity of each item of materials needed to complete a unit of standard product".Click here to read full article.23
2.Measuring Direct Labor Cost in Job Order Costing System:Direct labor costis handled in much the same way as direct materialscost. Direct laborconsists of labor charges that are easily traced to a particular job. Labor charges that cannot be easily traced directly to any job are treated as part of manufacturing overhead. Click here to read full article.3.Application of Manufacturing Overhead:Manufacturing overhead must be included with direct laboron the job cost sheet since manufacturing overhead is also a product cost. However, assigning manufacturing overhead to units of product can be a difficult task. Click here to read full article.4.Job Order Costing System - The Flow of Costs:To understand the flow of costs in job order costing system, we shall consider a single month's activity for a company, a producer of product A and product B. Click here to read full article.5.Multiple Predetermined Overhead Rates:When a single predetermined overhead rateis used for entire factory it is called plantwide overhead rate. This is fairly common practice - particularly in smaller companies. Click here to read full article.6.Under-applied overhead and over-applied overhead calculation:Since the predetermined overhead rateis established before a period begins and is based entirely on estimated data, the overhead cost applied to work in process (WIP)will generally differ from the amount of overhead cost actually incurred during aperiod. Click here to read full article.7.Disposition of any balance remaining in the manufacturing overhead account at the end of a period:What disposition should be made of an under-applied overhead or over-applied overhead balance remaining in the manufacturing overhead account at the end of a period? Click here to read full article.
b) and :
Work-In-Process (WIP) refers to the materials that have started the production process, but have not yet been completed. In other words, a company's partially finished goods. The work-in-process inventory account is an asset account that is used to track the cost of the partially finished goods.