ECONOMICS

Detailed explanation-1: -Job-order costing systems often use allocation bases that do not reflect how jobs actually use overhead resources. The allocation base in the predetermined overhead rate must drive the overhead cost to improve job cost accuracy. A cost driver is a factor that causes overhead costs.

Detailed explanation-2: -Job order costing is used to measure the revenue gained against the expenses incurred during the production process so that we can determine the profit for every unique job which is being manufactured.

Detailed explanation-3: -In job order costing, the allocation of overheads is done on the basis of an allocation base. This means that the cost accountants use a known cost as a proxy for allocating the unknown costs. For example, direct labor hours are known for the manufacturing of each product.

Detailed explanation-4: -A normal job-order costing system is a system that uses: Actual costs for direct materials and direct labor and estimated costs for overhead. Actual overhead costs are not assigned directly to jobs.

Detailed explanation-5: -Process costing and job order costing are both acceptable methods for tracking costs and production levels. Some companies use a single method, while some companies use both, which creates a hybrid costing system. The system a company uses depends on the nature of the product the company manufactures.