Problem - Destin Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Destin allocates manufacturing overhead costs using direct manufacturing labor costs.
Destin provides the following information:
Budget Actual Results for 2009 for 2009
Direct material costs $2,000,000 $1,900,000
Direct manufacturing labor costs 1,500,000 1,450,000
Manufacturing overhead costs 2,700,000 2,755,000
a) Compute the actual and budgeted manufacturing overhead rates for 2009.
b) During March, the job-cost record for Job 722 contained the following information:
Direct materials used $40,000
Direct manufacturing labor costs $30,000
Compute the cost of Job 722 using (a) actual costing and (b) normal costing.
c) At the end of 2009, compute the under- or overallocated manufacturing overhead under normal costing. Why is there no under- or overallocated overhead under actual costing?