Job costing, normal and actual costing. Anderson Construction assembles residential homes. It uses a job costing system with two direct cost categories (direct materials and direct labour) and one indirect cost pool (assembly support). The allocation base for assembly support costs is direct labour-hours. In December 2009, Anderson budgets 2010 assembly support costs to be $8,000,000 and 2010 direct labour-hours to be 160,000.

At the end of 2010, Anderson is comparing the costs of several jobs that were started and completed in 2010. Information for a couple of jobs follows.

Direct materials and direct labour are paid for on a contract basis. The costs of each are known when direct materials are used.or direct labour-hours are worked.
The 2010 actual assembly support costs were $6,888,000, while the actual direct labour-hours were 164,000.

REQUIRED 1. Compute the

(a) budgeted and

(b) actual indirect cost rate. Why do they differ?
2. What is the job cost 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?LO1

Transcribed Image Text:

Construction Period Direct materials Direct labour Direct labour-hours Laguna Model February-June 2010 $106,450 $ 36,276 900 Mission Model May-October 2010 $127,604 $ 41,410 1,010