Idergard AB assembles residential homes. It uses a job-costing system with two direct-cost categories (direct materials and direct labour) and one indirect-cost pool (assembly support). Direct-labour-hours is the allocation base for assembly support costs. In December 2018, Peterson budgets 2019 assembly support costs to be SKr 800,00,00 and 2019 direct-labour-hours to be 160,000.
At the end of 2019, Idergard is comparing the costs of several jobs that were started and completed in 2019.

Direct materials and direct labour are paid for on a contract basis. The costs of each are known when direct materials are used or direct-labour-hours are worked. The 2019 actual assembly support costs were SKr 688,80,00 while the actual direct-labour-hours were 164,000.

Required
1. Calculate the (a) budgeted and (b) actual indirect-cost rates. Why do they differ?
2. What is the job cost of the Mora model and the Solna model using (a) normal costing and (b) actual costing?
3. Why might Idergard Construction prefer normal costing over actual costing?

Transcribed Image Text:

Mora model Solna model Construction period February-June 2019 May-October 2019 Direct materials SKr 106 450 SKr 127 604 Direct labour SKr 36 276 SKr 41 410 Direct-labour-hours 900 1 010