Question

In a job order cost system, direct labor and factory overhead applied are debited to individual jobs. How are these items treated in a process cost system and why?

Answer 1

Answer:

The way the costs of direct labor and factory overhead applied are treated in a process costing system is different from their treatment in a job costing system.  In process costing system, they are debited to the Work in Process account.

The reason for this is that in process costing, costs are not directly attributable to individual jobs.  Instead, costs are accumulated in Work in Process before they are assigned to individual production units.

Explanation:

Job order costing system accumulates costs for individual jobs while a process costing system accumulates costs in the Work in Process account and then allocates the costs to individuals units of production.  The difference depends on the nature of the two systems and how possible it is to identify the costs and attribute them to individual jobs or units.