Concept explainers
Introduction:
Factory
Here, in the problem provided to us we are required to ascertain the reason as to why a company assigns the amount of factory overheads to individual jobs or job lots.
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Answer to Problem 1DQ
Solution:
As per the accounting principles, direct materials cost, direct labour costs and factory overhead are all part of the cost of a product during
Factory overheads generally include factory rent, factory
Explanation of Solution
As mentioned above that assigning overheads such as factory rent, factory depreciation etc is a difficult task, but their assignment is also important in order to find out the total inventory valuation and cost of goods sold. Rather these overheads are usually predetermined and assigned to jobs so that we can determine the
And therefore, the company or an organisation must estimate the amount of factory overheads to individual job or job lots.
Hence, assignment of factory overheads to individual job or job lots helps the management in taking important decisions such as price of the product, desired profit margin etc.
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Chapter 19 Solutions
FUNDAMENTAL ACCOUNTING PRINCIPLES
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