Tony Jefferson, owner of Rainking of Exercise 5-2, noticed that the watering systems for many houses in

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Tony Jefferson, owner of Rainking of Exercise 5-2, noticed that the watering systems for many houses in a local subdivision had the same layout and required virtually identical amounts of prime cost. Tony met with the subdivision builders and offered to install a basic watering system in each house. The idea was accepted enthusiastically, so Tony created a new company, Waterpro, to handle the subdivision business. In its first three months in business, Waterpro experienced the following:

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Required:
1. Should Waterpro use process costing or job-order costing? Explain.
2. If Waterpro uses an actual costing system, what is the cost of a single system installed in June? In July? In August?
3. Now assume that Waterpro uses a normal costing system. Estimated overhead for the year is $60,000, and estimated production is 600 watering systems. What is the predetermined overhead rate per system? What is the cost of a single system installed in June? In July? In August?

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Related Book For  book-img-for-question

Cost Management Accounting And Control

ISBN: 9780324233100

5th Edition

Authors: Don R. Hansen, Maryanne M. Mowen

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