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overhead
overhead costs
overhead allocated
Normal costing
Direct costs
Direct materials
Direct labor
Indirect costs
Assembly support ($50 920; $50 1,040)
Total costs
$106,650
36,276
142,926
46,000
$188,926
$127,970
41,750
169,720
52,000
$221,720
2b. Actual costing
Direct costs
Direct materials
Direct labor
Indirect costs
Assembly support ($47 920; $47 1,040)
Total costs
$106,650
36,276
142,926
43,240
$186,166
$127,970
41,750
169,720
48,880
$218,600
3. Normal costing enables Anderson to report a job cost as soon as the job is completed,
assuming that both the direct materials and direct labor costs are known at the time of use. Once
the 920 direct labor-hours are known for the Laguna Model (June 2014), Anderson can compute
the $188,926 cost figure using normal costing. Anderson can use this information to manage the
costs of the Laguna Model job as well as to bid on similar jobs later in the year. In contrast,
Anderson has to wait until the December 2014 year-end to compute the $186,166 cost of the
Laguna Model using actual costing.
Although not required, the following overview diagram summarizes Anderson
Construction’s job-costing system.
INDIRECT
COST
POOL
COST
ALLOCATION
BASE
Direct
Materials
COST OBJECT:
RESIDENTIAL
HOME
DIRECT
COSTS
Direct
Manufacturing
Labor
Indirect Costs
Direct Costs
Assembly
Support
Direct
Labor-Hours
$4,200,000
Machine-hours
2,000
1,000
Compute the total manufacturing overhead costs allocated to Job 494.
3. At the end of 2014, the actual manufacturing overhead costs were $2,100,000 in machining
and $3,700,000 in assembly. Assume that 55,000 actual machine-hours were used in
machining and that actual direct manufacturing labor costs in assembly were $2,200,000.
Compute the over- or underallocated manufacturing overhead for each department.
