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Which type of cost system, process, or job order is best for each of the following:...

Which type of cost system, process, or job order is best for each of the following: Jewelry maker? Give reasons for your answers. In the labor order system, direct labor and factory overhead are paid to individual jobs. How are these treated in the process cost system and why?

Solutions

Expert Solution

Jewellery making is an example of Process Costing.

Reason

Process costing is usually used by those industries who produced goods through different stages.Jewllery is an end product or finished product of a raw material which undergoes different levels of processing.Conversion cost is required for converting raw gold or any metal to jewellery and this is accounted in process costing.Process cost is a period cost. Job Costing is not the right answer as it is the method of costing which is made for any particular job or batch and not for converting process.Job cost is a terminal cost.

The treatment of direct labor and factory overhead in Process Costing

Direct labor and factory overhead are both expenses are written in the debit side of process account.

Direct labor means wages given to the labor who are wholly involved in the process. This wage is apportioned among different process on basis of time spent on each process.This is always debited to process account as it is a direct expense..

Factory overhead are easily identified with the process. They directly attribute to process and thus debited to process account.

ekkarill92 answered 1 year ago
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