2009-02-19_135008_Eh_1

# 2009-02-19_135008_Eh_1 - 1. Job order costing, consulting,...

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1. Job order costing, consulting, Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of firmwide support costs to the labor cost of the consultants on the engagement. The support costs are assigned to each consulting engagement using cost driver rate based on consultant labor costs. Mackenzie Consulting’s support costs are \$5 million per year, and total consultant labor cost is estimated at \$2.5 million per year. a. What is Mackenzie Consulting’s support costs driver rate? Support Cost Driver Rate: Cost Labor Direct times 2 Cost Labor Direct 000 , 500 , 2 \$ 000 , 000 , 5 \$ = b. If the consultant labor cost on an engagement is \$25,000, what costs will Mackenzie Consulting compute as the total cost of the consulting engagement? Consulting Engagement Cost: Labor cost \$20,000 Support cost 2 × labor cost 40,000 Total cost \$60,000 2. Single rate verse departmental rates Western Wood Product has two production departments: cutting and assembly. The company has been using a single predetermined cost driver rate based on plantwide direct labor hours. That is, the plantwide cost driver rate is computed by dividing plantwide support costs by total plantwide direct labor hours. The estimates for support costs and quantities of cost drivers for 2006 follow: Cutting Assembly Total Manufacturing support \$25,000 \$35,000 \$60,000

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## This note was uploaded on 05/15/2011 for the course ECON 101 taught by Professor 12 during the Spring '11 term at Harry S. Truman College - CCC.

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2009-02-19_135008_Eh_1 - 1. Job order costing, consulting,...

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