Question $2,$ Exercise $4-21($similar to$)$

Points: $0$ of $45$

Part $1$ of $12$

Ashton Construction assembles residential homes. It uses a job$-$costing system with two direct cost categories $($direct materials and direct labour$)$ and one indirect cost pool $($assembly support$).$ The allocation base for assembly support costs is direct labour$-$hours. In December $2021,$ Ashton budgets $2022$ assembly support costs to be $$7,150,000$ and $2022$ direct labour$-$hours to be $130,000.$ At the end of $2022,$ Anderson is comparing the costs of several jobs that were started and completed in $2022.$ Information for a couple of jobs follows:

$($Click the icon to view the data.$)$

Direct materials and direct labour are paid for on a contract basis. The costs of each are known when direct materials are used or direct labour$-$hours are worked. The $2022$ actual assembly support costs were $$7,224,000,$ while the actual direct labour$-$hours were $172,000.$

Required

Requirement $1.$ Compute the $($a$)$ budgeted and $($b$)$ actual indirect cost rates. Why do they differ?

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