Exercise 5.7 (Algorithmic)

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	6,620
Direct labor cost	$66,200
Overhead cost	$50,312

During the year, the following actual amounts were experienced:

Number of direct labor hours	6,145
Direct labor incurred	$67,595
Overhead incurred	$51,372.20

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 $3,380 of direct materials and 30 direct labor hours?

$