Question

Indicate which of the following statements is NOT correct

A. Both a job order and a process cost system track the same three manufacturing cost elements: direct materials, direct labor, and manufacturing overhead
B. A job order cost system uses only one work in process account,w here as a process cost system uses multiple work in process accounts
C. Manufacturing cost are accumulated the same way in a job order and in a process cost system
D. Manufacturing cost are assigned the same way in a job order and in a process cost system

Answer 1

The incorrect statement is D, asserting that manufacturing costs are assigned the same way in job order and in process cost systems. In reality, job order and process costing differ significantly in how they assign costs.

Step-by-step explanation:

The student has asked which of the statements about job order and process cost systems is NOT correct. The incorrect statement is: D. Manufacturing costs are assigned the same way in a job order and in a process cost system. This assertion is not accurate because in a job order cost system, costs are traced and applied to individual jobs, whereas in a process cost system, costs are allocated to processes or departments and averaged over units produced.

In terms of the production technologies outlined, it's clear how substitution of labor with machinery occurs as the cost of labor increases. If labor costs are low, as in example A where wages are $40, a labor-intensive technology (technology 1) is the most cost-effective. As labor costs rise (to $55 in example B and to $90 in example C), firms increasingly move toward a more machinery-intensive technology — technology 2 in example B, and finally to technology 3 in example C, which involves the least labor.