Tony Jefferson, of Rainking 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. Rainking estimated the following for the year:

Required:
1. Should Rainking use process costing or job-order costing? Explain.
2. If Rainking uses a normal costing system and overhead is applied on the basis of direct labor hours, what is the cost of an installation that takes $3,500 of direct materials and 50 direct labor hours?
3. Explain why Rainking would have difficulty using an actual costing system.

Transcribed Image Text:

Number of installations Number of direct labor hours Direct material cost Direct labor cost Overhead cost 250 5,000 $60,000 $75,000 $65,000 During the year, the following actual amounts were experienced: Number of installations 245 Number of direct labor hours 5,040 Direct materials used $59,350 Direct labor incurred $75,600 Overhead incurred $64,150