Question

1. Why might a company use a predetermined rate for applying overhead rather than just apply actual overhead?

2. How does job costing for a service organization differ from job costing for a manufacturer?

3. For which of the following businesses would a job order cost system be appropriate?

1. Auto Repair Shop
2. Crude Oil Factory
3. Drug Manufacturer
4. Root Beer Producer

4. Which of the following is not a characteristic of job costing?

1. Each job is distinguishable from other jobs.
2. Identical units are produced on an ongoing basis.
3. Job cost data are used for setting prices and bids.
4. It is possible to compare actual costs with estimated costs.
   

Answer 1

Q.1

Answer;

Main reason behind it is as follows,

company uses pre determined rate of overhead as management required to know overhead rate before the year end itself.

Q.2

Major difference is

As Under service organizations, usage of material is low while comparing with manufacturing companies, job costing under service organizations utility is very low but in surgical companies it is so important like electrical, accountancy, auto machines services.

Treatment under these organisations is quite different from the manufacturing companies in regarding material treatment, labor, and overhead treatment.

3rd Q;

Here answer is auto repairing shop as , in remaining options crude oil and root beer producing, and drug manufacturers

uses the process costing.

Thank you:-)

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