Question

Characteristics of Production Process, Cost Measurement Vince Melders, of EcoScape Company, designs and installs custom lawn...

Characteristics of Production Process, Cost Measurement

Vince Melders, of EcoScape Company, designs and installs custom lawn and garden irrigation systems for homes and businesses throughout the state. Each job is different, requiring different materials and labor for installing the systems. EcoScape estimated the following for the year:

Number of direct labor hours 6,940
Direct labor cost $62,460
Overhead cost $54,826

During the year, the following actual amounts were experienced:

Number of direct labor hours 6,195
Direct labor incurred $61,950
Overhead incurred $53,413.29

Required:

1. Should EcoScape use process costing or job-order costing?

2. If EcoScape uses a normal costing system and overhead is applied on the basis of direct labor hours,

What is the overhead rate? Round your answer to the nearest cent.

$ per direct labor hour

What is the average actual wage rate?

$ per direct labor hour

What is the cost of an installation that takes $3,310 of direct materials and 10 direct labor hours?

$

0 0
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Answer #1
1
As each job is different and requires customization
EcoScape should use job-order costing
2
Estimated Overhead cost 54826
Divide by estimated Number of direct labor hours 6940
Overhead rate 7.9 per direct labor hour
Direct labor incurred 61950
Divide by Number of direct labor hours 6195
Average actual wage rate 10 per direct labor hour
Direct materials 3310
Direct labor cost 100 =10*10
Overhead 79 =10*7.9
Cost of installation 3489
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