Reference no: EM131663803

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?