Response to the following problem:
Suppose that back in the 1970's, Steve was asked to build speakers for two friends. The first friend, Jan, needed a speaker for he rband. The second friend, Ed, needed a speaker built into the back of his hatchback automobile. Steve figured the following costs for each: Jan's Job Ed's job materials $50 $75 Labor hours 10 20 Steve knew that Jan's job would be easier, since he had experience in building the type of speaker she needed. Her job would not require any special equipment or specialized fitting. Ed's job, on the other hand, required specialized design and precise fitting. Steve thought he might need to build a mock-up of the speaker first, to fit it into space. In addition, he might have to add to his tool collection to complete the job. Normally, Steve figured a wage rate of $6 per hour and charged 20 percent of labor and materials as an overhead rate.
1. Prepare job-order cost sheets for the two jobs, showing total cost.
2. Conceptual connection: which cost do you think is more likely to be accurate? How might Steve build in some of the uncertainty of Ed's job into a budgeted cost?