Avery 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 2011, Avery

budgets 2012 assembly-support costs to be $8,200,000 and 2012 direct labor-hours to be 205,000. At the end of 2012, Avery is comparing the costs of several jobs that were started and completed in 2012

		Laguna Model		Mission Model
Construction period		Feb-June 2012		May-Oct 2012
Direct material costs		$106,570		$127,970
Direct labor costs		$36,580		$41,650
Direct labor-hours		910		1,070

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 2012 actual assembly-support costs were $8,525,000, and the actual direct labor-hours were 155,000.

REQUIRED:

1.	Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ? Identify the formula to calculate the budgeted indirect cost rate and then calculate the rate. 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? Identify the formula to calculate the indirect costs under normal costing and then calculate the indirect costs for each model. Now calculate the total costs using normal costing for each model. Identify the formula to calculate the indirect costs under actual costing and then calculate the indirect costs for each model. Now calculate the total costs using actual costing for each model.
3.	Why might Avery Construction prefer normal costing over actual costing?