Question 1
What are the direct costs of a job and in which source documents are they recorded?Question 2
What is the difference between an actual cost system and a normal cost system?Answer 1
The direct costs of a job are direct materials and direct labor. Direct materials are recorded in a basic source document called a materials-requisition record, which contains information about the cost of direct materials used on a specific job and in a specific department. Direct manufacturing labor is recorded in a labor-time sheet, which contains information about the amount of labor time used for a specific job in a specific department.Answer 2
An actual cost system is one that traces direct costs to a cost object by using the actual direct-cost rates times the actual quantities of direct-cost inputs, and allocates indirect costs based on the actual indirect cost rates times the actual quantities of the cost-allocation bases. A normal cost system is one that traces direct costs to a cost object by using the actual direct-cost rates times the actual quantities of direct-cost inputs, and allocates indirect costs based on the budgeted indirect cost rates times the actual quantities of the cost-allocation bases. Both systems trace direct costs to jobs the same way. An actual cost system traces indirect costs to jobs using actual indirect cost rates, but a normal cost system uses budgeted indirect cost rates to trace indirect costs to jobs.