Atkinson 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 2019, Atkinson budgets 2020 assembly-support costs to be $8,800,000 and 2020 direct labor-hours to be 220,000. At the end of 2020, Atkinson is comparing the costs of several jobs that were started and completed in 2020.

Requirements: 1. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ? a. Identify the formula to calculate the budgeted 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? 3. Why might Construction prefer normal costing over actual costing?

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 2020 actual assembly-support costs were $8,400,000, and the actual direct labor-hours were 200,000