Amesbury

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 2018, Amesbury budgets 2019 assembly support costs to be $8,160,000 and 2019 direct labour-hours to be 170,000. At the end of 2019, Anderson is comparing the costs of several jobs that were started and completed in 2019. Information for a couple of jobs follows:

Laguna Model

Mission Model

Construction Period

February-June 2019

May-October 2019

Direct materials

$105,620

$126,522

Direct labour

$34,109

$39,920

Direct labour-hours

860

990

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

2019

actual assembly support costs were

$6,232,000,

while the actual direct labour-hours were

164,000.

Required

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

Identify the formula to calculate the budgeted indirect cost rate and then calculate the rate. (Round your answers to the nearest whole dollar.)

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=

Budgeted indirect cost rate