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1 Data Table Laguna Model Construction period Direct materials costs Direct labor costs Direct labor-hours Feb-June 2017 106,440 $ 36,625 $ Mission Model May-Oct 2017 127,250 41,130 1,090 $ 970 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 $7,425,000, and the actual direct labor-hours were 165,000. Print Done X Requirements 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 Acre Construction prefer normal costing over actual costing? Print Done Done Acre 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, Acre budgets 2017 assembly-support costs to be $8,300,000 and 2017 direct labor-hours to be 166,000. At the end of 2017, Acre is comparing the costs of several jobs that were started and completed in 2017. 3(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 J = L 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 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 Indirect costs (Normal costing) Laguna per DLH x L Mission per DLH XL Now calculate the total costs using normal costing for each model. Laguna model Mission model Normal costing 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) = Indirect costs Laguna Mission per DLH per DLH x L x Now calculate the total costs using actual costing for each model. Laguna Model Mission Model Actual Costing enables Acre to report a job cost as soon as the job is completed. Total costs provides more accurate cost data. evaluate previous years earnings. Requirement 3. Why might Acre Construction prefer normal costing over actual costing? results in higher profits. manage the cost of their current jobs and bid on similar jobs later in the year. Acre Construction might prefer normal costing over actual costing because normal costing Acre can use this information to Choose from any list or enter any number in the input fields and then continue to the next

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