Question

1. 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

   Required:

   1. Should EcoScape use process costing or job-order costing?

   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.

   $fill in the blank 2 per direct labor hour

   What is the average actual wage rate?

   $fill in the blank 3 per direct labor hour

   What is the cost of an installation that takes $3,500 of direct materials and 20 direct labor hours?

   $fill in the blank

Answer 1