Question

Ashton 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 2016, Ashton budgets 2017 assembly-support costs to be $8,300,000 and 2017 direct labor-hours to be 166,000. At the end of 2017, Ashton is comparing the costs of several jobs that were started and completed in 2017. E (Click the icon to view the data.) Read the requirements. Requirements Data Table 1. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ? Laguna Model Mission Model Construction period Feb-June 2017 May-Oct 2017 2. What are the job costs of the Laguna Model and the Mission Model using (a) normal costing and (b) actual costing? Direct materials costs 106,550 $ 127,325 3. Why might Ashton Construction prefer normal costing over actual costing? 36,475 $ Direct labor costs 41,860 Direct labor-hours 960 1,060 Print Done 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 2017 actual assembly-support costs were $6,642,000, and the actual direct labor-hours were 162,000. Print Done
Company names may be different but the structure is the same! Please replace names with new company names if this applies! Thank you!

Answer 1

Requirement 1
Budgeted indirect costs	Budgeted direct labour hours	Budgeted indirect cost rate
8,300,000	166,000	50	per DLH
Actual indirect costs	Actual direct labour hours	Actual indirect cost rate
6,642,000	162,000	41	per DLH
Requirement 2
a) Normal costing
Model	Budgeted indirect cost rate	Actual direct labour hours	Indirect costs	Direct costs	Total costs
Laguna	50	960	48,000	145,025	193,025
Mission	50	1,060	53,000	169,205	222,205
b) Actual costing
Model	Actual indirect cost rate	Actual direct labour hours	Indirect costs	Direct costs	Total costs
Laguna	41	960	39,360	145,025	184,385
Mission	41	1,060	43,460	169,205	212,665