Essaybased question on Topic Job order costing & process costing

 

Below are US CMA Part 1–level, ACCA Management Accounting based, scenario-based ESSAY questions on Job Order Costing, exactly in the style tested in the exam.
I’ve also highlighted decision keywords, computations, and pricing logic, which examiners expect.

---

1️⃣ Scenario: Choosing Job Order Costing vs Process Costing (Decision-Oriented)

Question

ABC Ltd manufactures customized industrial machines as per customer specifications. Each machine differs in design, material, and labor hours. Management is confused whether to use Job Order Costing or Process Costing.

Required:
a) Identify the appropriate costing system
b) Justify your answer with CMA-relevant reasoning
c) Explain why the alternative system is unsuitable

---

Answer

a) Appropriate Costing System:
👉 ?

b) Justification (Exam Keywords)

1.

2.

3.

c) Why ***? Costing is unsuitable:

1.

2.

✔  Conclusion:
Organizations producing ******** products must use ******* Costing.

---

2️⃣ Scenario: Industry Identification – Which Organization Uses Job Order Costing?

Question

Identify whether the following organizations would use Job Order Costing or Process Costing, with justification:

1. Shipbuilding company
2. Oil refinery
3. Advertising agency
4. Cement manufacturer

---

Answer

Organization	Costing System	Reason
Shipbuilding	*****	********
Oil refinery	*****	********
Advertising agency	*****	********
Cement manufacturer	******	*******

✔ Exam Insight:
If output is distinguishable → Job order 
If output is identical → Process

---

3️⃣ Scenario: Computation of Job Order Cost (Highly Tested)

Question

Omega Printers received Job No. 215 with the following details:

• Direct Material: ₹80,000
• Direct Labor: 2,000 hours @ ₹150 per hour
• Estimated annual manufacturing overhead: ₹9,00,000
• Estimated annual direct labor hours: 30,000 hours

Required:
a) Compute the Predetermined Overhead Rate (POHR)
b) Calculate the Total Job Cost

---

Answer

Step 1: Predetermined Overhead Rate

Step 2: Applied Overhead

Step 3: Total Job Cost

Cost Element	Amount (₹)
Direct Material	*****
Direct Labor (**** × ***)	*****
Applied Overhead	*****
Total Job Cost	******

✔ Exam Focus:

Overhead is applied, not actual during the year.

---

4️⃣ Scenario: Pricing Decision Based on Job Order Cost (Very Important)

Question

The company wants to quote a price for Job No. 215.
It requires a 30% markup on total manufacturing cost.

Required:
Compute the quoted selling price.

---

Answer

✔ Exam Tip:
Always check whether markup is on:

• Manufacturing cost, or
• Selling price (common trap)

---

5️⃣ Scenario: Under- or Over-Applied Overhead (Essay + Logic)

Question

Actual manufacturing overhead incurred was ₹9,50,000.
Actual direct labor hours worked were 28,000 hours.

Required:
a) Compute applied overhead
b) Identify under- or over-applied overhead
c) Explain treatment

---

Answer

a) Applied Overhead

b) Over/Under Applied

c) Treatment :

✔ Key Term:
Actual OH > Applied OH  or applied overhead lesser than actual overhead⇒ Under-applied

---

6️⃣ High-Scoring Comparison Essay (Frequently Asked)

Question

“Job Order Costing provides more accurate product costing than Process Costing.”
Discuss.

---

Answer

Job Order Costing provides more accurate cost information when products are customized because:

1.

2.

However, Process Costing is efficient when:

1.

2.

✔ Conclusion:
Accuracy depends on nature of production, not superiority of system.

---

🔑 EXAM KEYWORDS TO MEMORIZE (VERY IMPORTANT)

• Custom orders
• Non-homogeneous products
• Cost accumulation by job
• Predetermined overhead rate
• Applied vs actual overhead
• Pricing based on cost plus markup

---

Best wishes 👍

www.gmsisuccess.in