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Explain question 2 with detail ACC 221 - Presentation Question (Chapter 4) GROUP FOUR Caldwell Toys produces toys mainly for the domestic market. The company
Explain question 2 with detail
ACC 221 - Presentation Question (Chapter 4) GROUP FOUR Caldwell Toys produces toys mainly for the domestic market. The company uses a job-costing system under which materials and labors used in the manufacturing process are directly allocated to different jobs. Whereas costs incurred in the manufacturing support department are indirect in nature and allocated to different jobs on the basis of direct labor-hours. Caldwell budgets 2019 manufacturing-support costs to be $5,100,000 and 2019 direct labor-hours to be 150,000. At the end of 2019, Caldwell collects the cost-related data of different jobs that were started and completed in 2019 for comparison. They are as follows: Steel Wheels Production period Jan-May 2019 Direct material costs $78,290 Direct labor costs $25,445 Direct labor-hours 840 Magic Wheels May-Sept 2019 $94,650 $32,752 960 The 2019 actual manufacturing-support costs were $5,355,000 and the actual direct labor-hours were 153,000. Required: 1. Compute the: a) Budgeted indirect-cost rate. b) Actual indirect-cost rate. c) Why do they differ? 2. What are the job costs of the Steel Wheels and the Magic Wheels using: a) Normal costing b) Actual costing 3. Why might Caldwell Toys prefer normal costing over actual costingStep by Step Solution
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