Question 5 (20 marks)

a. What do you understand by job-order costing?

b. What do you understand by absorption costing?

c. Explain why some production costs must be assigned to products through an allocation process?

d. Why do companies use predetermined overhead rates rather than the actual manufacturing overhead costs to apply overhead to jobs?

e. If a company fully allocates all of its overhead costs to jobs, does this guarantee that a profit will be earned for the period?