Reference no: EM131774481

Problem - Jeff Boyer, of Rainking 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. Rainking estimated the following for the year:

Number of installations 250

Number of direct labor hours 5,000

Direct materials cost $60,000

Direct labor cost $75,000

Overhead cost $65,000

During the year, the following actual amounts were experienced:

Number of installations 245

Number of direct labor hours 5040

Direct materials used $59,350

Direct labor incurred $75,600

Overhead incurred $64,150

1. Should Rainking use the process costing or job-order costing? Explain.

2. If Rainking uses a normal costing system and overhead is applied on the basis of direct labor hours, what is the cost of an installation that takes $3,500 of direct material and 50 direct labor hours?

3. Explain why Rainking would have difficulty using an actual costing system?