Question: 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 Result 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. Compute the actual and budgeted manufacturing overhead rates for 2017.
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.
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?
4. Why might managers at Dakota Products prefer to use normal costing?