Using the following information compute the budgeted indirect-cost rate and the actual indirect-cost rate. Explain the difference. What are the job costs of the Laguna Model and the Mission Model using normal costing and using actual costing?
Why might the company prefer normal costing over actual costing?
Given information is:
In December 2006 the company budgets 2007 assembly-support costs to be $8,000,000 and 2007 direct labor-hours to be 160,000.
At the end of 2007, the company is comparing the costs of several jobs that were started and completed in 2007. The 2007 actual assembly-support costs were $6,888,000 and the actual direct labor-hours were 164,000.
Laguna Mode Mission Model
Construction period Feb-June 07 May-Oct 07
Direct Materials $106,450 $127,604
Direct Labor $36,276 $41,410
Direct labor-hours 900 1,010
How do you solve this problem?
Normal cost = Actual direct materials cost + actual direct labor cost + actual direct labor hours * budgeted indirect-cost rate (budgeted overhead rate)
Actual cost = Actual direct materials cost + actual direct labor cost + actual direct labor hours * actual indirect-cost rate
The budgeted ...
This solution calculates the job costs of projects using normal costing and actual costing.