Characteristics of Production Process, Cost Measurement Vince Melders, of EcoSca

Question

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 Direct labor cost Overhead cost During the year, the following actual amounts were experienced: Number of direct labor hours Direct labor incurred Overhead incurred 6,660 $53,280 $55,944 6,130 55,170 $56,003.68

Explanation / Answer

1.Job order costing.

(Since each job is different using different materials and labour, we need job order costing).

2.overhead rate = estimated overhead cost / estimate direct labour hours

=>$55,944 / 6,660

=>$8.40 per direct labour hour

b.actual wage rate = actual direct labour cost / actual direct labour hours

=>$55,170 / 6.130

=>$9.00 per direct labour hour

c. cost of an installation that takes $3690 direct materials and 20 direct labour hours

=> direct material + actual direct labour + overhead applied

=> $3690 + ($9.00 * 20 direct labour hours) + ($8.40 * 20 direct labour hours)

=>3690 + 180 + 168

=>$4,038.

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