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Budgeted manufacturing overhead divided by the budgeted quantity of the allocation base:Machining Department overhead:$1,500,00030,000= $50 per machine-hourAssembly Department overhead:$5,100,000$3,000,000= 170% of direct manuf. labor costs2.Machining department overhead allocated, 2,800 hours $50$140,000Assembly department overhead allocated, 170% $19,00032,300Total manufacturing overhead allocated to Job 494$172,3003.Machining Dept.Assembly Dept.Actual manufacturing overhead$1,800,000$ 5,300,000Manufacturing overhead allocated,$50 33,000 machine-hours1,650,000— 170% $3,200,000— 5,440,000Underallocated (Overallocated)$ 150,000$ (140,000)4-14
Datar, Cost Accounting, 16e4-26Job costing, consulting firm. Frontier Partners, a management consulting firm, has thefollowing condensed budget for 2017:Frontier has a single direct-cost category (professional labor) and a single indirect-cost pool(client support). Indirect costs are allocated to jobs on the basis of professional labor costs.Required:1.Prepare an overview diagram of the job-costing system. Calculate the 2017 budgetedindirect-cost rate for Frontier Partners.2.The markup rate for pricing jobs is intended to produce operating income equal to 10% ofrevenues. Calculate the markup rate as a percentage of professional labor costs.3.Frontier is bidding on a consulting job for Sentinel Communications, a wirelesscommunications company. The budgeted breakdown of professional labor on the job is asfollows:Calculate the budgeted cost of the Sentinel Communications job. How much will Frontier bid forthe job if it is to earn its target operating income of 10% of revenues?4-15
Datar, Cost Accounting, 16eSOLUTION(2025 min.) Job costing, consulting firm.1.Budgeted indirect-cost rate for client support can be calculated as follows:Budgeted indirect-cost rate = $25,000,000 ÷ $20,000,000 = 125% of professional laborcosts2.At the budgeted revenues of $50,000,000 Frontier’s operating income of $5,000,000 equals10% of revenues.Markup rate = $50,000,000 ÷ $20,000,000 = 250% of direct professional labor costs4-16COSTALLOCATIONBASECOST OBJECT:JOB FORCONSULTINGCLIENTDIRECTCOSTSIndirect CostsDirect CostsINDIRECTCOSTPOOLProfessionalLabor CostsProfessionalLabor CostsProfessionalLaborClientSupport