Solution of Cost Accounting:
Problem 4-18
Part 1:
Budgeted indirect cost rate = Budgeted indirect costs (assembly support)/ Budgeted direct labor-hours
= $8,300,000 / 166,000 hours
= $50 per direct labor-hour
Actual indirect cost rate = Actual indirect costs (assembly support)/ Actual direct labor-hours
= $6,520,000/163,000 hours
= $40 per direct labor-hour
Both rates are different because in Budgeted indirect cost rate, Budgeted indirect costs (assembly support) and Budgeted direct labor-hours are used, while in Actual indirect cost rate, Actual indirect costs (assembly support) and Actual direct labor-hours are used.
Part 2:
Laguna Model Mission Model
Normal costing
Direct costs
Direct materials $106,760 $127,550
Direct labor 36,950 41,320
143,710 168,870
Indirect costs
Assembly support ($50*960; $50*1,050) 48,000 52,500
Total costs $191,710 $221,370
Actual costing
Direct costs
Direct materials $106,760 $127,550
Direct labor 36,950 41,320
143,710 168,870
Indirect costs
Assembly support ($40*960; $40*1,050) 38,400 42,000
Total costs $182,110 $210,870
