# Blueprints for a garage for one of his clients and

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Chapter 9 / Exercise 43
Algebra and Trigonometry: Real Mathematics, Real People
Larson
Expert Verified
blueprints for a garage for one of his clients and involving 30 hours of work, How much indirect costs should ford allocate to the garage blueprints job when considering how muchto charge his client and cover his costs?A) \$450B) \$810C) \$360D) \$330Answer: CDiff: 1Objective: 8AACSB: Analytical thinking10) In some variations of normal costing, organizations use budgeted rates to assign direct costs as well as indirect costs to jobs. Answer: TRUEDiff: 2Objective: 8AACSB: Analytical thinking
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Chapter 9 / Exercise 43
Algebra and Trigonometry: Real Mathematics, Real People
Larson
Expert Verified
11) In some service organizations, a variation of normal costing is used to provide timely information during the progression of the year, using budgeted direct labor costs and allocated budgeted overhead.Answer: TRUEDiff: 2Objective: 8AACSB: Analytical thinking12) An accounting firm completes an audit for a local union and has the following cost information for the year. Indirect labor \$60,000Office lease \$22,000Depreciation on office equipment \$8,000Marketing expense \$20,000Utilities \$15,000The firm's direct labor costs are budgeted at \$500,000 for the year and overhead is allocated based on direct labor costs. The firm used 1 partner and 2 audit associates on the audit. Partners are paid \$150 per hour while audit associates earn \$50 per hour. The partner spent 6 hours on the engagement while the audit associates spent a total of 40 hours. Required:What is the cost of the audit?Answer: (\$150 x 6) + (40 x \$50) + (\$2,900 x (\$125,000/\$500,000) = \$3,625Diff: 2Objective: 8AACSB: Analytical skills13) A local engineering firm is bidding on a design project for a new client. The total budgeted direct-labor costs for the firm are \$400,000. The total budgeted indirect costs are \$600,000. It is estimated that there are 8,000 billable hours in total.Required:a.What is the budgeted direct-labor cost rate?b.What is the budgeted indirect-cost rate assuming direct-labor cost is the allocation base?c.What should be the engineering firm bid on the project if the direct labor hours are estimated at 300 hours?Answer: a.\$400,000/8,000 = \$50/hourb.\$600,000/\$400,000 = 150% of direct labor costc.(300 × 50) + (15,000 × 1.5) = \$37,500Diff: 3Objective: 8AACSB: Analytical skills
14) A local CPA employs ten full-time professionals. The budgeted compensation per employee is \$50,000. The maximum billable hours for each client are 400. Clients always receive their full amount of time. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirectcosts for the year are \$200,000 and the firm had 20 clients.Required:a.What is the direct-labor-cost rate per hour?b.What is the indirect-cost rate per hour? Answer: a.Total direct cost= \$50,000 × 10 = \$500,000Total hours= 400 × 20 = 8,000Direct-cost rate per unit = \$500,000/8,000 = \$62.50 per hourb.Indirect-cost rate per unit = \$200,000/8,000 = \$25.00 per hour Diff: 2Objective: 8AACSB: Analytical skills