Question

1.  Explain the role of activity drivers in assigning costs to products.

2. Why are the accounting requirements for job order costing more demanding than those of process costing?

3. Folio Glass produces custom glass platters. For one job, the trainee assigned to cut the glass set the template incorrectly into the computer. This template was unusable and had to be discarded; another template was cut to the correct dimensions. How is the cost of the spoiled template handled?

Answer 1

1.Generally to allocate a specific category of cost we need activity driver, which is a basis to apprtion the entire cost for a catagory to different projects based on their use or performance so it allocate a expenses category to the projects based on the appropriate criteria to get better result analysis.

2. Process costing helps us in deriving total cost for a specific process where job costing helps us in deriving cost for a specific job which we can directly compare with the revenue received for the specifc job and decide on our profitability.

3. If the action is regular and comes in regular action and frequently then it will be assigned to the job cost. Otherwise it will be treted as extra ordinary cost and not be a part a total cost.