Chapter 4, Problem 4.22E

Actual costing, normal costing, accounting for manufacturing overhead. Dakota Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Dakota allocates manufacturing overhead costs using direct manufacturing labor costs. Dakota provides the following information:

	Budget for 2017	Actual Results for 2017
Direct material costs	$2,250,000	$2,150,000
Direct manufacturing labor costs	1,700,000	1,650,000
Manufacturing overhead costs	3,060,000	3,217,500

1. 1. Compute the actual and budgeted manufacturing overhead rates for 2017.

Required

1. 2. During March, the job-cost record for Job 626 contained the following information:

Direct materials used	$55,000
Direct manufacturing labor costs	$45,000

Compute the cost of Job 626 using (a) actual costing and (b) normal costing.

1. 3. At the end of 2017, compute the under- or overallocated manufacturing overhead under normal costing. Why is there no under- or overallocated manufacturing overhead under actual costing?
2. 4. Why might managers at Dakota Products prefer to use normal costing?