Question

1. Why is it important for a company to estimate the amount of overhead assigned/applied to individual jobs? At the completion of the job an adjustment is made to zero out this overhead to equal to actual overhead cost. Explain why with examples
2. Take into consideration the activities undertaken by a health clinic in your area - Are Job order costing system appropriate for the clinic? Why? List many factors as possible to lead you to basically conclude that health clinic in your area used the job order system.

Answer 1

Overhead costs are the indirect and sometimes invisible costs associated with producing a product or service .Making sales is more exciting than conserving expenses but both are essential functions of a manufacturing business.Overhead cost costs just like sales levels and direct expenses should be examined on a consistent ,routine basis.

Overhead costs are expenses which cannot be conveniently identified with a specific product or activity.Unlike materials and production labour overhead is an invisible part of the finished product .Yet overhead is a basic input in to production process just like raw materials.Understanding the nature of overhead costs can assist the managers in controlling these expenses.proper allocation of overhead costs among products or departments permits the manager to understand their firm production costs.It also allows the manager to determine how much each product or segment of the firm is contributing to overall profitability.

Job costing is a multi step process that requires job numbers to be assigned to individual items of expenses and revenues.Job costing is a business accounting term that means the tracking of Costa and revenues by job and the standardised reporting of profitability by job.

Job order costing is a system of expense monitoring in which a business only creates products to fill customer or client orders.Employee complete job order cost sheets for each order and usually separate expense in to three main categories direct material ,direct labour and manufacturing overhead.Companies in many industries can use job order costing through a variety of product offerings or services complicates th tracking of expenses.Medical services businesses including hospitals small doctor offices and medical billing companies can use job order costing to consider each patient or bill as an individual job .Record keeping for job order costing in service industries including the medical field can be more complex than in other industries because the businesses offer a wide array of services according to accounting for management.This requires mediçal service businesses and other service companies to keep detailed records of each specific job to determine costs correctly,for example a doctors office may order patients based on the purpose of visits and the costs of treatments administered