Smith Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool.

Smith allocates manufacturing overhead costs using direct manufacturing labor costs. Smith provides the following information:

	Budget for 2017	Actual Results for 2017
Direct material costs	$2,300,000	$2,175,000
Direct manufacturing labor costs	1,600,000	1,525,000
Manufacturing overhead costs	3,040,000	2,973,750

1.

Compute the actual and budgeted manufacturing overhead rates for 2017.

2.

During March, the job-cost record for Job 626 contained the following information:

	Direct materials used	$45,000
	Direct manufacturing labor costs	$35,000

Compute the cost of Job 626 using (a) actual costing and (b) normal costing.

3.

At the end of 2017, compute the under- or overallocated manufacturing overhead under normal costing. Why is there no under- or overallocated overhead under actual costing?

4.

Why might managers at Smith Products prefer to use normal costing?