Question

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, Anderson budgets 2017 assembly-support costs to be $8,300,000 and 2017 direct labor-hours to be 166.000. At the end of 2017, Anderson is comparing the costs of several jobs that were started and completed in 2017 (Click the icon to view the data) Read the requirements Requirement 1. Compute the (a) budgeted indirect.cost rate and (b) actual indirect.cost rate. Why do they differ? Identify the formula to calculate the budgeted indirect cost rate and then calculate the rate (1) (2) - Budgeted indirect cost rate per DLH Identify the formula to calculate the actual indirect cost rate and then calculate the rate Actual Indirect cost rate per DLH These rates differ because (5) – Requirement 2. What are the job costs of the Laguna Model and the Mission Model using a normal costing and (b) actual costing? (a) Identify the formula to calculate the indirect costs under normal costing and then calculate the indirect costs for each model (Normal costing) (6) ( - Indirect costs Laguna Mission x per DLH * per DLH XL Now calculate the total costs using normal costing for each model Laguna Mission Normal costing model model (8) Total costs (b) Identify the formula to calculate the indirect costs under actual costing and then calculate the indirect costs for each model (Actual costing) (10) XC (11) Indirect costs Laguna per DLH = Mission per DLH X E Now calculate the total costs using actual costing for each model.

Answer 1

1. Budgeted indirect costs/Budgeted direct labor hours = Budgeted indirect cost rate

$8300000/166000 = $50 per DLH

Actual indirect costs/Actual direct labor hours = Actual indirect cost rate

$7425000/165000 = $45 per DLH

These rates differ because both the cost and hour amounts in the two calculations are different.

2(a) Normal costing:

Budgeted indirect cost rate x Actual direct labor hours = Indirect costs

Laguna: $50 per DLH x 980 = $49000

Mission: $50 per DLH x 1070 = $53500

	Laguna model	Mission model
Direct costs	143225	169235
Indirect costs	49000	53500
Total costs	192225	222735

Direct costs:

Laguna: $106350 + $36875 = $143225

Mission: $127825 + $41410 = $169235

2(b) Actual costing:

Actual indirect cost rate x Actual direct labor hours = Indirect costs

Laguna: $45 per DLH x 980 = $44100

Mission: $45 per DLH x 1070 = $48150

	Laguna model	Mission model
Direct costs	143225	169235
Indirect costs	44100	48150
Total costs	187325	217385

3. (14) enables Anderson to report a job cost as soon as the job is completed.

(15) manage the cost of their current jobs and bid on similar jobs later in the year.