Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 6,720
Direct labor cost $67,200
Overhead cost $50,400

During the year, the following actual amounts were experienced:

Number of direct labor hours 6,045
Direct labor incurred $66,495
Overhead incurred $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 virtually 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 following:

June July August
Number of systems installed 48 68 88
Direct materials used $14,976 $21,216 $27,456
Direct labor incurred $9,984 $14,144 $18,304
Overhead $8,985.60 $9,900.80 $10,982.40

Required:

1. Should Irrigation Specialties use process costing or job-order costing?

Process 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 $fill in the blank 2 per system
July $fill in the blank 3 per system
August $fill in the blank 4 per system

3. Now assume that Irrigation Specialties uses a normal costing system. Estimated overhead for the year is $62,000, and estimated production is 620 watering systems. What is the predetermined overhead rate per system?

$fill in the blank 5 per system installed

What is the cost of a single system installed in June? In July? In August?

June $fill in the blank 6 per system
July $fill in the blank 7 per system
August $fill in the blank 8 per system

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions