# Cost pool cost allocation base direct cost indirect

• Test Prep
• 39
• 100% (2) 2 out of 2 people found this document helpful

This preview shows page 25 - 29 out of 39 pages.

COSTPOOLCOSTALLOCATIONBASE}}}}DIRECTCOSTIndirect CostsDirect CostsProfessionalLabor2. Budgeted professionallabor-hour direct cost rate= Budgeted direct labor compensation per professionalBudgeted direct labor-hours per professional= \$104,0001,600 hours= \$65 per professional labor-hour Note that the budgeted professional labor-hour direct-cost rate can also be calculated by dividing total budgeted professional labor costs of \$2,600,000 (\$104,000 per professional ×25 professionals) by total budgeted professional labor-hours of 40,000 (1,600 hours per professional ×25 professionals), \$2,600,000 ÷40,000 = \$65 per professional labor-hour. Budgeted indirectcost rate= Budgeted total costs in indirect cost poolBudgeted total professional labor-hours= 25hours1,600\$2,200,000×= \$2,200,00040,000 hours= \$55 per professional labor-hour 4. Richardson Punch Direct costs: Professional labor, \$65 ×100; \$65 ×150 Indirect costs: Legal support, \$55 ×100; \$55 ×150\$ 6,500 5,500 \$12,000 \$ 9,750 8,250 \$18,000 3.
4-26 4-33 (25–30 min.)Service industry, job costing, two direct- and indirect-cost categories, law firm (continuation of 4-32). Although not required, the following overview diagram is helpful to understand Keating’s job-costing system. 1. Professional Partner Labor Professional Associate Labor Budgeted compensation per professional Divided by budgeted hours of billable time per professional Budgeted direct-cost rate \$ 200,000 ÷1,600 \$125 per hour*\$80,000 ÷1,600 \$50 per hour*Can also be calculated asTotal budgeted partner labor costsTotal budgeted partner labor - hours= \$200,000 51,600 5××= 000,8\$1,000,000= \$125 Can also be calculated asTotal budgeted associate labor costsTotal budgeted associate labor - hours= \$80,000 201,600 20××= \$1,600,00032 000,= \$ 502. General Support Secretarial Support Budgeted total costs Divided by budgeted quantity of allocation base Budgeted indirect cost rate \$1,800,000 ÷ 40,000 hours \$45 per hour \$400,000 ÷ 8,000 hours \$50 per hour ProfessionalLabor-HoursGeneralSupportCOST OBJECT:JOB FORCLIENTINDIRECTCOSTPOOLCOSTALLOCATIONBASE}}}}DIRECTCOSTIndirect CostsDirect CostsPartnerLabor-HoursSecretarialSupportProfessionalAssociate LaborProfessionalPartner Labor
4-27 3. Richardson Punch Direct costs: Professional partners, \$125 ×60; \$125 ×Professional associates, \$50 ×40; \$50 ×120 Direct costs Indirect costs: General support, \$45 ×100; \$45 ×150 Secretarial support, \$50 ×60; \$50 ×Indirect costs Total costs \$7,500 2,000 \$ 9,500 4,500 3,000 7,500 \$17,000 \$3,750 6,000 \$ 9,750 6,750 1,500 8,250 \$18,000 4. Richardson Punch Single direct - Single indirect (from Problem 4-32) Multiple direct – Multiple indirect (from requirement 3 of Problem 4-33) Difference \$12,000 17,000 \$ 5,000 undercosted \$18,000 18,000 \$ no change The Richardson and Punch jobs differ in their use of resources. The Richardson job has a mix of 60% partners and 40% associates, while Punch has a mix of 20% partners and 80% associates. Thus, the Richardson job is a relatively high user of the more costly partner-related resources (both direct partner costs and indirect partner secretarial support). The refined-costing system in Problem 4-32 increases the reported cost in Problem 4-32 for the Richardson job by 41.7% (from \$12,000 to \$17,000).
30
30
0
4-28 4-34 (2025 min.) Proration of overhead. 1. Budgeted manufacturing overhead rate is \$4,800,000 ÷ 80,000 hours = \$60 per machine-hour. 2. Manufacturing overhead