Question

What are job-order costing and process costing? What types of firms use job-order costing? Process costing? Explain how overhead is assigned to production when a predetermined overhead rate is used. Assume that a company has decided not to allocate any support department costs to producing departments. Describe the likely behavior of the managers of the producing departments. Would this be good or bad? Explain why allocation would correct this type of behavior.

Answer 1

ANSWER:

What are job-order costing and process costing? What types of firms use job-order costing? Process costing?

Job-order costing is the type of explicit request costing under which each activity is treated as a cost unit and expenses are amassed and found out independently for each job. An occupation may comprise of a vocation, items, bunch of items, contract, assistance or some other explicit request.

Job costing is applied in those ventures where the merchandise is produced our administrations are rendered against explicit requests according to the client's specifications. It is commonly applied in-

1. engineering ventures
2. construction ventures
3. transport building ventures

Process costing is a technique for Costing under which all expenses are aggregated for each phase of creation (additionally called procedure of creation) and the expense per unit of an item is determined at each phase of creation by separating them the all-out expense of each procedure by the typical yield of the procedure

Process costing is applied in those enterprises where fabricating exercises is conveyed a consistently by methods for at least two procedures and the yield of one procedure turns into the contribution of the following procedure till completion.it is commonly applied in -

1. paper ventures
2. Chemicals ventures
3. materials ventures
4. sugar ventures

Explain how overhead is assigned to production when a predetermined overhead rate is used.

Predetermined overhead rate is utilized to apply to fabricate overhead to items or employment arranges and is typically registered toward the start of every period by isolating the assessed producing overhead expense by an allotment base (otherwise called action base or action driver). Usually utilized portion bases are immediate work hours, direct work dollars, machine hours, and direct materials.

Predetermined overhead rate = Estimated manufacturing overhead cost/Estimated total units in the allocation base

Assume that a company has decided not to allocate any support department costs to producing departments.

In allocating bolster office cost is the quick change in innovation, numerous organizations at present find that help division cost portion is valuable for them. However, the push toward action-based costing and in the nick of time assembling can Virtually wipe out the requirement for help office cost allocation. In the instance of without a moment to spare industrial facility and assembling cells, a great part of the administrations (model upkeep, materials taking care of and arrangements) is performed by cell laborers and designation isn't essential

Describe the likely behavior of the managers of the producing departments. Would this be good or bad? Explain why allocation would correct this type of behavior.

Producing office make the items or administrations that the firm is ready to go to assembling and deals. Bolster divisions serve to deliver offices however don't themselves make an attractive item. since help divisions exist to help the assortment of delivering departments, the shoreline of help office is basic to all creating office and must be designated to them. Allocation can be utilized to support positive administrative conduct.

Three techniques can be utilized to allot bolster administration expenses to creating office:- direct strategy, the successive technique, and the equal method. these techniques vary in the level of help office collaboration considered. by taking note of help office cooperation, a progressively precise item costing is achieved. The result can be improved arranging, control and dynamic