Question

Strat Music Company manufactures violas and uses a job-order costing system. What account should be debited for the labor costs of the workers who carve the wood for the instruments?

Direct Labor

a. Work in Process

b. Manufacturing Overhead

c. Salaries and Wages Receivable

d. Salaries and Wages Expense

Answer 1

Ans) Option (A) Work in process

Steps in job-order costing process

In a job-order costing system, jobs are accounted for using the job-order cost sheet. The process involves the following steps:

1. Identification of the job
2. Tracing direct costs to the job
3. Identifying the indirect costs i.e. manufacturing overheads and finding the cost allocation base for each cost.
4. Applying the indirect costs to the job using the pre-determined allocation rate.
5. Finding total cost by summing up all the cost components.
6. Closing the under/over-applied manufacturing overheads to cost of goods sold/income statement.
7. Calculating revenue and profit.