Amesbury 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 2016, Amesbury budgets 2017 assembly-support costs to be $8,300,000 and 2017 direct labor-hours to be 166,000. At the end of 2017, Amesbury is comparing the costs of several jobs that were started and completed in 2017.

1.	Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ?
2.	What are the job costs of the Laguna Model and the Mission Model using (a) normal costing and (b) actual costing?
3.	Why might Amesbury Construction prefer normal costing over actual costing?

	Laguna Model	Mission Model
Construction period		Feb-June 2017	May-Oct 2017
Direct materials costs		$106,920	$127,970
Direct labor costs		$36,950	$41,410
Direct labor-hours		920	1,050

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

2017

actual assembly-support costs were

$8,016,000,

and the actual direct labor-hours were

167,000.