Purchase Solution

Job costing: normal and actual costing

Not what you're looking for?

Job costing, normal and actual costing.

Anderson Construction assembles residential houses. It uses
a job-costing system with two direct-cost categories (direct materials and direct labor) and one indirect-cost pool (assembly support). Direct labor-hours is the allocation base for assembly support costs. In December 2006, Anderson budgets 2007 assembly-support costs to be \$8,000,000 and 2007 direct labor-hours to be 160,000.
At the end of 2007, Anderson is comparing the costs of several jobs that were started and completed in 2007.

Laguna Model Mission Model
Construction period Feb-June 2007 May-Oct 2007
Direct materials \$106,450 \$127,604
Direct labor \$36,276 \$41,410
Direct labor-hours 900 1,010
Direct materials and direct labor are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labor-hours are worked. The 2007 actual assembly-support costs were \$6,888,000, and the actual direct labor-hours were 164,000.

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 Laguna Model and the Mission Model using (a) normal costing and (b) actual costing?
3. Why might Anderson Construction prefer normal costing over actual costing?

Solution Summary

Excel file contains calculation of budgeted indirect-cost rate and actual indirect-cost rate and the job costs of the normal costing and actual costing.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.