Budgeted manufacturing overhead divided by the budgeted quantity of the

Budgeted manufacturing overhead divided by the

This preview shows page 14 - 18 out of 69 pages.

Budgeted manufacturing overhead divided by the budgeted quantity of the allocation base: Machining Department overhead: $1,500,000 30,000 = $50 per machine-hour Assembly Department overhead: $5,100,000 $3,000,000 = 170% of direct manuf. labor costs 2. Machining department overhead allocated, 2,800 hours $50 $140,000 Assembly department overhead allocated, 170% $19,000 32,300 Total manufacturing overhead allocated to Job 494 $172,300 3. Machining Dept. Assembly Dept. Actual manufacturing overhead $1,800,000 $ 5,300,000 Manufacturing overhead allocated, $50 33,000 machine-hours 1,650,000 170% $3,200,000 5,440,000 Underallocated (Overallocated) $ 150,000 $ (140,000 ) 4-14
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Datar, Cost Accounting, 16e 4-26Job 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
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Datar, Cost Accounting, 16e SOLUTION (20 25 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 labor costs 2. At the budgeted revenues of $50,000,000 Frontier’s operating income of $5,000,000 equals 10% of revenues. Markup rate = $50,000,000 ÷ $20,000,000 = 250% of direct professional labor costs 4-16 COST ALLOCATION BASE COST OBJECT: JOB FOR CONSULTING CLIENT DIRECT COSTS Indirect Costs Direct Costs INDIRECT COST POOL Professional Labor Costs Professional Labor Costs Professional Labor Client Support
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Datar, Cost Accounting, 16e
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