QUESTION 26 Assume that you are a consultant regarding accou

QUESTION 26 Assume that you are a consultant regarding accounting systems for manufacturing entities Address the following exercising your best writing skills. Your answers should be thorough A] What characteristics should you look for when evaluating whether a company should adopt a job order or a process cost system or a hybrid? Explain and define all torms clearly us are great tor clarity B] What is a JIT inventory system? Identity an industry that might adopt such an inventory system? Be specific C Write a brief memo to your supervisor that distinguishes between actual manufacturing overhead and APPLIED factory overhead BE SPECIFIC

Solution

A] Job order costing is a assigns costs (materials & labour ) incurred in relation to a specific job and assigns overhead cost at pre determined rate and is best suitable for the companies different types of work i.e non repetitive an dunique in nature as it helps to understand the profitability of each such job.

while process costing assigns costs to departments based on the output produced per day. If a company works on department basis undertaking different processes in production of goods then it is suitable.

B] JIT inventory system means Just In Time is an inventory system wherein goods are produced or acquired as an d when they are needed i.e few hour before they put to use. Helps to avoid inventory handling cost. Best suitable to retail traders, dealers in perishable goods.

C] Actual manufacturing overheads means the Overheads that are actually incurred during the period. Applied factory overheads are calculated using budgeted fixed overheads & normal production capacity.

Applied - Budgeted Overheads/normal capacity of production

and this per unit rate is applied to actual production.

however actual overheads can be more or less than this applied overheads. which is under or over aborption of overheads.