Bobs Construction assembles residential houses. It uses a job-costing system with two direct-cost categories (direct materials and direct labour) and one indirect-cost pool (assembly support). Direct labour-hours is the allocation base for assembly support costs. In December 2016, Bob budgets 2017 assembly-support costs to be $88,000 and 2017 direct labour-hours to be 22,000.

At the end of 2017, Bob is comparing the costs of several jobs that were started and completed in 2017.

	Bubba MODEL	Bouie Model
Construction Period	Feb June 2017	May Oct 2017
Direct Material Cost	$10,655	$12,745
Direct Labour Cost	$3,625	$4,113
Direct Labour Hours	95	110

Direct materials and direct labour are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labour-hours are worked. The 2017 actual assembly-support costs were $84,000, and the actual direct labour-hours were 20,000.

Required

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 Bubba Model and the Bouie Model using (a) normal costing and (b) actual costing?

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