Job costing, normal and actual costing. Anderson Construction assembles residential houses. It uses a job-costing system with two direct-cost categories (direct materials and direct labor) and one indirect-cost pool (assembly support). Direct labor-hours is the allocation base for assembly support costs. In December 2007, Anderson budgets 2008 assembly-support costs to be $8,000,000 and 2008 direct labor- hours to be 160,000.

At the end of 2008, Anderson is comparing the costs of several jobs that were started and completed in 2008.

Direct materials and direct labor are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labor-hours are worked. The 2008 actual assembly-support costs were $6,888,000, and the actual direct labor-hours were 164,000.

1. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ?

2. What are the lob costs of the Laguna Model and the Mission Model using (a) normal costing and (b) actual costing?

3. Why might Anderson Construction prefer normal costing over actual costing?

Transcribed Image Text:

Laguna Model Feb-June 2008 Mission Model May-Oct 2008 Construction period Direct material costs Direct labor costs Direct labor-hours $106,450 $ 36,276 $127,604 S 41,410 1,010 900