Chapter 3: Job Order Costing Problem 2 Andersen Construction Andersen Construction is a custom home builder in suburban New Jersey. Andersen typically builds single family houses allowing the customer to choose among a limited array of floor plans and styles. Andersen prices its houses on a cost plus basis. It uses a cost system with two direct cost categories (direct materials and direct labor) and one overhead cost pool. Andersen allocates overhead using direct labor-hours as the allocation base. For 2021 Andersen budgeted overhead of $10,200,000 and 136,000 hours of direct labor. In January 2022, Victoria Hat, Andersen's controller, was reviewing the accuracy of the costing system to see if any adjustments to the costing system were warranted. Specifically, she was comparing the costs of two of the houses Andersen had built: Model Direct material costs Direct labor costs Direct labor hours Bock House Cape Cod $322,240 $103,650 2,332 Elias House Contemporary $245,370 $95,430 2,069 For the year 2021 actual overhead was $9,730,000 and actual direct labor hours were 139,000. Calculate: 1. The predetermined overhead allocation rate and the actual overhead allocation rate. Why are they different? 2. The cost of the Bock House and the Elias House using the predetermined overhead allocation rate and the actual allocation rate. 3. What method would Andersen prefer? Why?