Question

Khadka Manufacturing manufactures work benches for local and domestic markets. Materials and labour used in the manufacturing process are directly allocated to different jobs as the company uses a job costing system. Costs incurred in the manufacturing support department are indirect in nature and allocated to different jobs on the basis of direct labor-hours. Khadka estimates 2019 manufacturing-support costs to be $1,700,000 and 2019 direct labor-hours to be 50,000.

At the end of 2019, Khadka collects the cost-related data of different jobs that were started and completed in 2019 for comparison. They are as follows:

	Iron benches	Wooden benches
Production period	Jan-May 2019	May-Sept 2019
Direct material costs	$39,145	$47,325
Direct labour costs	$12,723	$16,376
Direct labour-hours	420	480

Direct materials and direct labour are paid for on a contractual basis. The costs of each are known when direct materials are used or when direct labour hours are worked. The 2019 actual manufacturing-support costs were $1,785,000 and the actual direct labour-hours were 51,000.

Required:

1. Compute the budgeted indirect-cost rate and the actual indirect-cost rate.
2. What are the job costs of the Iron benches and the Wooden benches using normal costing and actual costing?

3. Job costs under Normal costing	Iron benches	Wooden benches
   _	_	_
   _	_	_
   _	_	_
   Total Costs	_	_

   Job costs under Actual costing	Iron benches	Wooden benches
   _	_	_
   _	_	_
   _	_	_
   Total Costs	_	_

4. _

5. Why might the managers of Khadka Manufacturing prefer to use normal costing?

Answer 1

Answers:

For part (a) and (b), please check the attachment below:

(e).

Managers of Khadka Manufacturing prefer to use normal costing because normal costing uses the budgeted overhead rate to calculate the manufacturing overheads and to estimate the cost of the job. This helps the managers to evaluate the job cost, bidding the job to be performed and finally preparing interim financial statements.

.

.

______________

Really hope this helps! Thankyou!

______________