CengageNOW Assignmens in\" CengageNOW | Assignment Print Characteristics of Prod

Question

CengageNOW Assignmens in" CengageNOW | Assignment Print Characteristics of Production Process, Cost Measurement vince Melders, of EcScape Company, designs and installs custom lawn and garden irrigation 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 Direct labor cost Overhead cost 6,720 $67.200 $50,400 During the year, the following actual amounts were experienced Number of direct la bor hours Direct labor incurred Overhcad incurred 6,045 $66,495 $50,500 Vince Melders, owner of EcoScape, noticed that the watering systems for many houses in a local subdivision had the same layout and required virtualy identical amounts of prime cost. Vince met with the subdivision builders and offered to install a basic watering system in each house. The idea was accepted enthusiastically, so Vince created a new company, Irrigation Specialties, to handle the subdivision business. In its first three months in business, Irrigation Specialties experienced the folowing: July Augusi Number of systems installed Direct materials used Direct labor incurred 60 $18,000 $12,000 $10,900 80 524,000 516,000 $12,340 120 $36,000 $24,000 $14,500 Required: 1. Should Irrigation Specialties use process costing or job-order costing? 2. If Irrigation Specialties uses an actual costing system, what is the cost of a single system installed in June? In July? In August? Round your answers to the nearest dollar June $ system July per system August $per system 3. Now assume that Irrigation Specialties uses a normal costing system. Estimated overhead for the year is $54,000, and estimated production is 600 watering systems. What is the predetermined overhead rate per system? hrtp lije cengagenow com/ilm/takeAssignment/printU'ntakenAssignment doassignment 3/17/201

Explanation / Answer

Answer 1. Process Costing Answer 2. June July Aug Direct Material    18,000.00    24,000.00    36,000.00 Direct Labor    12,000.00    16,000.00    24,000.00 Overhead    10,900.00    12,340.00    14,500.00 Total Cost    40,900.00    52,340.00    74,500.00 No. of System Installed            60.00            80.00          120.00 Cost per System          681.67          654.25          620.83 Answer 3. Predetermined Overhead Rate = $54,000 / 600 Systems Predetermined Overhead Rate = $90 per system June July Aug Direct Material    18,000.00    24,000.00    36,000.00 Direct Labor    12,000.00    16,000.00    24,000.00 Overhead Applied      5,400.00      7,200.00    10,800.00 Total Cost    35,400.00    47,200.00    70,800.00 No. of System Installed            60.00            80.00          120.00 Cost per System          590.00          590.00          590.00

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