Arctic 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 2006, Arctic budgets years 2007 assembly support costs to be and year 2007 direct labor-hours to be 160,000.

L-model M-model

Construction Period Feb-June 2007 May-October 2007

Direct Material 106,000 127,604

Direct Labor 36,276 41,410

Direct Labor hours 900 1,010

At the end of 2007, Arctic is comparing ,the costs of several jobs that were started and completed in 2007.

Direct materials and direct labor are paid for on a contract basis. The costs of each are known when direct materials are used or direct labor-hours are worked. The 2007 actual assembly support costs were P6,888,000, and the actual direct labor-hours were 164,000.

What is the budgeted indirect-cost rate?

What is the actual indirect-cost rate?

What is the job cost of the L Model using normal costing?

What is the job cost of the M Model using actual costing?