In job order cost accounting, the three elements of manufacturing cost are charged directly to job orders. Why is it not necessary to charge manufacturing costs in process cost accounting for job orders?
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In process cost accounting, manufacturing costs are not directly charged to job orders because the focus is on the production process as a whole rather than individual job orders. Process cost accounting is used when companies produce a large quantity of similar products in a continuous flow or in batches.
In this system, the manufacturing costs are accumulated and allocated to each unit based on a predetermined overhead rate or a standard cost. The costs are then averaged and spread evenly across all units produced during the accounting period. This allows for a more accurate allocation of costs to each unit, taking into account variations in materials, labor, and overhead across the entire production process.
Since the focus is on the overall process rather than individual job orders, it is not necessary to track and charge costs to specific job orders in the same way as in job order cost accounting. Instead, the total manufacturing costs are distributed across all units produced. This approach simplifies the accounting process, especially when dealing with large volumes of similar products.
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