Job order costing accumulates and records costs by job and assists managers in e

Question

Job order costing accumulates and records costs by job and assists managers in evaluating actual and expected costs related to direct materials, direct labor, and factory overhead costs Select a company that would employ a job order costing system. Research the company and discuss why a job order costing system is the 'correct' fit for that organization. Discuss a product the company sells and discuss what direct and indirect costs would be included on the job cost sheet. Follow the minimum requirements for discussion board posts located in the general discussion area. Recall, those are the minimum requirements, more posts are always encouraged. Ce

Explanation / Answer

A job order costing is a costing where we assign the manufacturing costs to an individual product, which constitutes a vital part of overall costs. Like in a car manufacturing company, the production of car involves a manufacturing costs, which includes a reportable direct materials and direct labor used along with manufacturing overhead assigned to each car production at rate predetermined.

Under the job order costing, a manager could able to describe the cost to a job/product because a job cost record is being maintained for each job or product. The job cost records so maintained serves the subsidiary ledger or a WIP inventory document.

Under a car manufacturing, a manager could control the direct cost like material which are directly recognized to a product and the labor employed on the said job. This cost constitutes around 85% of the total cost. The rest 15% is the Manufacturing Overhead costs which constitutes indirect costs and could not be recognized with a specific job, so a predetermined rate has been defined, with experience, to apply the cost on the product’s total cost based on a suitable factor.

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