Question

E4-23 (similar to) Question Help Attleboro 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, Attleboro budgets 2017 assembly-support costs to be $8,600,000 and 2017 direct labor-hours to be 215,000. At the end of 2017, Attleboro 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. = Budgeted indirect cost rate i Data Table Construction period Direct materials costs Direct labor costs Direct labor-hours Laguna Model Feb-June 2017 106,450 $ 36,625 $ 960 Mission Model May-Oct 2017 127,450 41,920 1,020 Choose from any drop-down list and then click Check Answer. 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. 11 partsining

Answer 1

Budgeted Indirect Cost rate Budgeted Indirect Costs (Assembly Support) 8,600,000 Budgeted Direct Labor Hours 215,000 = = / 40 Per DLH I Actual Indirect Cost rate Actual Indirect Costs (Assembly Support) 6,642,000 Actual Direct Labor Hours 162,000 41 Per DLH 02,000 These rates differ because both the numeratr and the denominator in the two calculations are different. one based on budgeted numbers and the other based on actual numbers.