Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 4, Problem 4.23E
Job costing, normal and actual costing. Atkinson 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, Atkinson budgets 2017 assembly-support costs to be $8,800,000 and 2017 direct labor-hours to be 220,000.
At the end of 2017, Atkinson is comparing the costs of several jobs that were started and completed in 2017.
| Laguna Model | Mission Model | |
| Construction period | Feb–June 2017 | May–Oct 2017 |
| Direct material costs | $106,550 | $127,450 |
| Direct labor costs | $36,250 | $41,130 |
| Direct labor-hours | 970 | 1,000 |
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 $8,400,000, and the actual direct labor-hours were 200,000.
- 1. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ?
Required
- 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 Atkinson Construction prefer normal costing over actual costing?
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Atkinson Construction assembles residential houses. It uses a job-costing system with two direct-cost categories (direct materials and direct labor) and one i ndirect-cost pool (assembly support). Direct labor-hours is the allocation base for assembly support costs. In December 2016, Atkinson budgets 2017 assembly-support costs to be $8,800,000 and 2017 direct laborhours to be 220,000.
At the end of 2017, Atkinson is comparing the costs of several jobs that were started and completed in 2017. Laguna Model Mission Model Construction period Feb–June 2017 May–Oct 2017 Direct material costs $106,550 $127,450 Direct labor costs $ 36,250 $ 41,130 Direct labor-hours 970 1,000 Direct materials…
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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.
(3)
/
(4)
=
Actual indirect cost…
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 as the allocation base for assembly support costs. In December
2016, Ashton budgets 2017 assembly-support costs to be $8,100,000 and
2017 direct labor-hours to be 135,000. At the end of 2017, Ashton is
comparing the costs of several jobs that were started and completed in 2017.
Read the requirements2.
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.
(3)
/
(4)…
Chapter 4 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 4 - Define cost pool, cost tracing, cost allocation,...Ch. 4 - How does a job-costing system differ from a...Ch. 4 - Why might an advertising agency use job costing...Ch. 4 - Describe the seven steps in job costing.Ch. 4 - Give examples of two cost objects in companies...Ch. 4 - Describe three major source documents used in...Ch. 4 - What is the advantage of using computerized source...Ch. 4 - Give two reasons why most organizations use an...Ch. 4 - Distinguish between actual costing and normal...Ch. 4 - Describe two ways in which a house-construction...
Ch. 4 - Comment on the following statement: In a...Ch. 4 - Describe three different debit entries to the...Ch. 4 - Describe three alternative ways to dispose of...Ch. 4 - When might a company use budgeted costs rather...Ch. 4 - Prob. 4.15QCh. 4 - Which of the following does not accurately...Ch. 4 - Sturdy Manufacturing Co. assembled the following...Ch. 4 - For which of the following industries would...Ch. 4 - ABC Company uses job-order costing and has...Ch. 4 - Under Stanford Corporations job costing system,...Ch. 4 - (10 min) Job costing, process costing. In each of...Ch. 4 - Actual costing, normal costing, accounting for...Ch. 4 - Job costing, normal and actual costing. Atkinson...Ch. 4 - Budgeted manufacturing overhead rate, allocated...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Job costing, consulting firm. Frontier Partners, a...Ch. 4 - Time period used to compute indirect cost rates....Ch. 4 - Accounting for manufacturing overhead. Creative...Ch. 4 - Job costing, journal entries. The University of...Ch. 4 - Journal entries, T-accounts, and source documents....Ch. 4 - Job costing, journal entries. Donald Transport...Ch. 4 - Job costing, unit cost, ending work in process....Ch. 4 - Job costing; actual, normal, and variation from...Ch. 4 - Job costing; variation on actual, normal, and...Ch. 4 - Proration of overhead. The Ride-On-Wave Company...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Service industry, job costing, law firm. Kidman ...Ch. 4 - Service industry, job costing, two direct- and two...Ch. 4 - Proration of overhead. (Z. Iqbal, adapted) The Zaf...Ch. 4 - Normal costing, overhead allocation, working...Ch. 4 - Proration of overhead with two indirect cost...Ch. 4 - General ledger relationships, under- and...Ch. 4 - Overview of general ledger relationships. Estevez...Ch. 4 - Allocation and proration of overhead. Resource...Ch. 4 - (2530 min.) Job costing, ethics. Joseph Underwood...Ch. 4 - Job costingservice industry. Market Pulse performs...
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