Andrews 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, Avery budgets 2017 assembly-support costs to be $8,280,000 and 2017 direct labor-hours to be 230,000. At the end of 2017, Avery is comparing the costs of several jobs that were started and completed in 2017.

		Laguna Model	Mission Model
Construction period		Feb-June 2017	May-Oct 2017
Direct materials costs		$106,440	$127,125
Direct labor costs		$36,276	$41,920
Direct labor-hours		960	1,060

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 $5,635,000, and the actual directlabor-hours were 161,000.

Requirements

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

a. Identify the formula and calculate the budgeted indirect cost rate and then calculate the rate

b. identify the formula to calculate the actual indirect cost rate and then calculate the rate

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

a. identify the formula to calculate the indirect costs under normal costing then calculate the indirect costs for each model

b. Now calculate the total costs using normal costing for each model

c. identify the formula to calculate the indirect costs under actual costing and then calculate the indirect costs for each model

d. Now calculate the total costs using actual costing for each model

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

Acre Construction might prefer normal costing over actual costing because normal costing ______ Avery can use this information to _____