Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen

تمرين 9

CHARACTERISTICS OF PRODUCTION PROCESS, COST MEASUREMENT
Refer to the data in Exercise 5-7. Elin Saunders, owner of Lawn Pro, noticed that the watering systems for many houses in a local subdivision had the same layout and required virtually identical amounts of prime cost. Elin met with the subdivision builders and offered to install a basic watering system in each house. The idea was accepted enthusiastically, so Elin created a new company, Irrigation Specialties, to handle the subdivision business. In its first three months in business, Irrigation Specialties experienced the following:

Required:
1. Should Irrigation Specialties use process costing or job-order costing? Explain.
2. If Irrigation Specialties uses an actual costing system, what is the cost of a single system installed in June? In July? In August?
3. Now assume that Irrigation Specialties uses a normal costing system. Estimated overhead for the year is $40,000, and estimated production is 500 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?