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The following items may be used in costing jobs in an absorption costing system:
(1) Actual material cost
(ii) Actual manufacturing overheads
(iii) Absorbed manufacturing overheads
(iv) Actual labour cost.Which of the above are contained in a typical job cost?
(A) (i), (ii) and (iv) only
(B) (i) and (iv) only
(C) (i), (iii) and (iv) only
(D) All four of them
Sir the answer is “C” as given in the textbook. I am unable to understand the question. Please help me understand.
Actual material and actual labour costs are direct, variable costs which would be specifically booked to a job.
The handling of fixed manufacturing overheads is different. An absorption rate (eg per labour hour) is set at the start of the period and applied during the period. Actual overheads are not relevant to this process. Therefore, overheads would be added to the cost of the job according to what are absorbed, not those that are actually incurred.
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