A process cost system and a job order cost system both use a predetermined overhead rate to apply estimated manufacturing overhead costs to work in process.

Question

Quizplus · Accepted Answer

Both process cost system and job order cost system use a predetermined overhead rate to allocate estimated manufacturing overhead costs to work in process. The difference lies in the method of applying the overhead rate. In a process cost system, the predetermined overhead rate is based on the expected level of activity for the entire production process, while in a job order cost system, the predetermined overhead rate is based on the estimated overhead costs specific to each job or batch of products.

A Process Cost System and a Job Order Cost System