Take an example from our childhood entrepreneurial endeavors(running a lemonade stand or neighborhood lawn mowing services,making crafts to sell at a local crafts fair, babysitting, etc.).Imagine these products and services as businesses, in which you arethe manager with several teenagers as your employees.
Define the âjobsâ in job costing. Explain how you would measuredirect materials cost, direct labor cost, and compute predeterminedoverhead rates. What are your actual manufacturing overhead costs,and why arenât they traced to jobs, just as direct materials anddirect labor are traced to jobs? Give reasons why overhead might beunder-applied or over-applied in a given year. What factors shouldbe considered in selecting a base to be used in computing thepredetermined overhead rate? Why?
Take an example from our childhood entrepreneurial endeavors(running a lemonade stand or neighborhood lawn mowing services,making crafts to sell at a local crafts fair, babysitting, etc.).Imagine these products and services as businesses, in which you arethe manager with several teenagers as your employees.
Define the âjobsâ in job costing. Explain how you would measuredirect materials cost, direct labor cost, and compute predeterminedoverhead rates. What are your actual manufacturing overhead costs,and why arenât they traced to jobs, just as direct materials anddirect labor are traced to jobs? Give reasons why overhead might beunder-applied or over-applied in a given year. What factors shouldbe considered in selecting a base to be used in computing thepredetermined overhead rate? Why?
