costacctg13_sm_ch05

5024575056 1380 indirectcostsforassociates 20802040

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Unformatted text preview: decide if it wants to price each service at cost, below cost, or above cost. If it prices above cost, it may use advert ising and other means to encourage addit ional use o f those services by customers. Of course, in determining its pricing strategy, FIB would need to consider how other compet ing banks are pricing their products and services. 5­28 (15 min.) Job costing with single direct­cost category, single indirect­cost pool, law firm. 1. Pricing decisio ns at Wigan Associates are heavily influenced by reported cost numbers. Suppose Wigan is bidding against another firm fo r a client with a jo b similar to that of Widnes Coal. If the costing system overstates the costs of these jo bs, Wigan may bid too high and fail to land the client. If the costing system understates the costs of these jo bs, Wigan may bid low, land the client, and then lose mo ney in handling the case. 2. Direct professio nal labor, $70 × 104; $70 × 96 Indirect costs allocated, $105 × 104; $105 × 96 Total costs to be billed Widnes Coal $ 7,280 10,920 $18,200 St. Helen’s Glass $ 6,720 10,080 $16,800 Total $14,000 21,000 $35,000 5­22 5­29 (20–25 min.) Job costing with multiple direct­cost categories, single indirect­cost p...
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This note was uploaded on 10/11/2010 for the course ACCT 321 taught by Professor Cole during the Spring '10 term at University of Miami.

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