Answer:
1.Overhead Rate = Overhead Costs/ Direct Labor Costs
Budget Overhead Rate = 3060,000/ 1700,000= 1.8
Actual Overhead Rate = 3217,500/ 1650,000= 1.895
Dakota Products
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
2.During March, the job-cost record for Job 626
Direct materials used $55,000
Direct manufacturing labor costs $45,000
Actual Overhead = 1.895 * $45,000= $ 85295.45
Normal Overhead = 1.8 * 45,000= $ 81,000
2.The actual cost of Job 626 =$ 55,000+ $ 45,000+ $ 85295.45= $ 185,295.45
2.The normal cost of Job 626 =$ 55,000+ $ 45,000+ $ 81,000= $181,000
3. Under- or Overallocated Overhead under normal costing=
Budgeted Overhead - Actual Overhead= 3,060,000 - 3,217,500=
157,500 underapplied
There is no under- or overallocated overhead under actual costing because overhead costs actually are at their actual costs. There is no difference between calculated and actual.
4. Normal Costing would give an idea before 2017 and it is easier to make decision prior to changes. Actual results can only be obtained after the process. Managers find it easier to pre plan . So normal costing is adoptable.
