Now that we have a better understanding of job costing lets take an example from our childhood entrepreneurial endeavors (running a lemonade stand or neighborhood lawn mowing services making crafts to sell at a local crafts fair babysitting etc.). Imagine these products and services as businesses in which you are the manager with several teenagers as your employees.
In your initial post define the jobs in job costing. Explain how you would measure direct materials cost direct labor cost and compute predetermined overhead rates.
What are your actual manufacturing overhead costs and why arent they traced to jobs just as direct materials and direct labor are traced to jobs?
Give reasons why overhead might be under-applied or over-applied in a given year.
What factors should be considered in selecting a base to be used in computing the predetermined overhead rate? Why?

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