Clayton Solutions designs Web pages for clients in the education sector. The company’s job-costing system has a single direct cost category (Web-designing labor) and a single indirect cost pool composed of all overhead costs. Overhead costs are allocated to individual jobs based on direct labor-hours. The company employs six Web designers. Budgeted and actual information regarding Clayton Solutions follows:

Required

1. Compute the direct-cost rate and the indirect-cost rate per Web-designing labor-hour for 2020 under 

(a) Actual costing, 

(b) Normal costing, and 

(c) The variation of normal costing that uses budgeted rates  for direct costs.
2. Which method would you suggest Clayton Solutions use? Explain.
3. Clayton Solutions’ Web design for Greenville Day School was budgeted to take 95 direct labor-hours. The actual time spent on the project was 80 hours. Compute the cost of the Greenville Day School job using 

(a) Actual costing, 

(b) Normal costing, and 

(c) The variation of normal costing that uses budgeted rates for direct costs.

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Budget for 2020: Direct labor costs Direct labor-hours Overhead costs Actual results for 2020: Direct labor costs Direct labor-hours Overhead costs $280,000 10,000 $180,000 $260,000 10,000 $200,000