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Overheads, Job Costing, Budgets

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Hassel and Carpenter Law Office employs six full-time attorneys and five paraprofessionals.
Budgeted salaries include $75,000 for each attorney and $20,000 per paraprofessional.
For 1999, indirect costs were budgeted at $125,000, but actually amounted to $150,000.
Actual salaries were $80,000 for each attorney and $22,500 for each paraprofessional.

Direct and indirect costs are applied on a professional, labor-hour basis, which include both
attorney and paraprofessional hours. Total budgeted labor hours were 25,000; however,
actual labor hours were 30,000.

What is the actual direct-cost rate and the actual indirect-cost rate, respectively, if a client
used 5,000 professional labor hours?
a. $13.00; $7.50
b. $13.00; $5.00
c. $12.03; $5.00
d. $11.75; $5.00

How much should the client be billed in a normal costing system when 1,000 professional
labor hours were used?
a. $20,025
b. $18,000
c. $16,750
d. $13,625

How much should the client be billed in an actual costing system if 200 professional labor
hours were used?
a. $6,425
b. $5,250
c. $4,200
d. $3,350

ABC Hospital uses a job cost system for all patients who have surgery. In January, the pre-
operating room (PRE-OP) and operating room (OR) had budgeted allocation bases of 2,000
nursing hours and 1,000 nursing hours, respectively. The budgeted nursing overhead charges
for each department for the month were $84,000 and $66,000, respectively. The hospital
floor for surgery patients had budgeted overhead costs of $600,000 and 7,500 nursing hours
for the month. For patient Bill Dole, actual hours incurred were eight and four hours,
respectively, in the PRE-OP and OR. He was in the hospital for four days (96 hours.) Other
costs related to Dole were:
PRE-OP costs OR costs In-Room costs
Patient medicine: $100 $250 $1,200
Direct Nursing time: $2,400 $3,500 $5,400

The hospital uses a budgeted overhead rate for applying overhead to patient stays. What
is the total cost of the stay of Bill Dole?
a. $1,550
b. $11,300
c. $8,280
d. $21,130

Bill's Electronics manufactures computer mouses. In April, the two production departments
had budgeted allocation bases of 5,000 machine hours in Department One and 2,500 direct
manufacturing labor hours in Department Two. The budgeted manufacturing overheads for
the month were $23,000 and $25,000. Respectively. For Job 100, the actual costs incurred
in the two departments were as follows:
Department One Department Two
Direct materials purchased on account $44,000 $71,000
Direct materials used $13,000 $5,400
Direct manufacturing labor $21,000 $21,400
Indirect manufacturing labor $4,400 $3,600
Indirect materials used $3,000 $1,900
Lease on equipment $6,500 $1,500
Utilities $400 $500

Job 100 incurred 500 machine hours in Department One and 150 manufacturing labor hours
in Department Two. The company uses a budgeted departmental overhead rate for applying
overhead to production. WHAT IS THE TOTAL COST OF JOB 100?
a. $18,400
b. $60,800
c. $64,600
d. $82,600

The financial budget is that part of the master budget that comprises:
a. The capital budget and the cash budget.
b. The capital budget and the budgeted balance sheet.
c. The capital budget, the cash budget, and the budgeted statement of cash flows.
d. The cash budget, the budgeted statement of cash flows, and the retained earnings budget.

The direct materials usage budget is based on:
a. The units to be produced during a period.
b. Budgeted sales dollars.
c. The predetermined factory overhead rate.
d. The amount of labor hours worked.

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Answer is in the attached file
Hassel and Carpenter Law Office employs six full-time attorneys and five paraprofessionals.
Budgeted salaries include $75,000 for each attorney and $20,000 per paraprofessional.
For 1999, indirect costs were budgeted at $125,000, but actually amounted to $150,000.
Actual salaries were $80,000 for each attorney and $22,500 for each paraprofessional.

Direct and indirect costs are applied on a professional, labor-hour basis, which include both
attorney and paraprofessional hours. Total budgeted labor hours were 25,000; however,
actual labor hours were 30,000.

There appears to be some error in the data of the problem as the answer does not match any of the options
However if 3 instead of 6 attorneys are taken then we get the answers

What is the actual direct-cost rate and the actual indirect-cost rate, respectively, if a client
used 5,000 professional labor hours?
a. $13.00; $7.50
b. $13.00; $5.00
c. $12.03; $5.00
d. $11.75; $5.00 Option d is correct

Actual Direct cost rate=(3*80000+5*22500)/30000
11.75
Actual indirect cost rate=150000/30000
5

How much should the client be billed in a normal costing system when ...

Solution Summary

The solution provides answers and explanations for multiple choice questions on Overheads, Job Costing, Budgets.

$2.19
Similar Posting

Cost accounting problems: 4-2, 4-16, 4-19, 4-20, 4-21

See attached file for clarity.

4- 2 How does a job-costing system differ from a process-costing system?

4- 16 Job costing, process costing. In each of the following situations, determine whether job costing or process costing would be more appropriate.

a. A CPA firm l. A landscaping company
b. An oil refinery m. A cola- drink- concentrate producer
c. A custom furniture manufacturer n. A movie studio
d. A tire manufacturer o. A law firm
e. A textbook publisher p. A commercial aircraft manufacturer
f. A pharmaceutical company q. A management consulting firm
g. An advertising agency r. A breakfast- cereal company
h. An apparel manufacturing plant s. A catering service
i. A flour mill t. A paper mill
j. A paint manufacturer u. An auto repair shop
k. A medical care facility

4- 19 Budgeted manufacturing overhead rate, allocated manufacturing overhead. Waheed Company uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine- hour. The following data are available for 2008:

Budgeted manufacturing overhead costs $ 4,000,000
machine- hours 200,000
Actual manufacturing overhead costs $ 3,860,000
Actual machine- hours 195,000

Required
1. Calculate the budgeted manufacturing overhead rate.
2. Calculate the manufacturing overhead allocated during 2008.
3. Calculate the amount of under- or overallocated manufacturing overhead.

4- 20 Job costing, accounting for manufacturing overhead, budgeted rates. The Lynn Company uses a job- costing system at its Minneapolis plant. The plant has a Machining Department and an Assembly Department. Its job- costing system has two direct- cost categories ( direct materials and direct manufacturing labor) and two manufacturing overhead cost pools ( the Machining Department overhead, allocated to jobs based on actual machine- hours, and the Assembly Department overhead, allocated to jobs based on actual direct manufacturing labor costs). The 2009 budget for the plant is:

Machining Department Assembly Department
Manufacturing overhead $ 1,800,000 $ 3,600,000
Direct manufacturing labor costs $ 1,400,000 $ 2,000,000
Direct manufacturing labor- hours 100,000 200,000
Machine- hours 50,000 200,000

Required
1. Present an overview diagram of Lynn's job- costing system. Compute the budgeted manufacturing over-head rate for each department.
2. During February, the job- cost record for Job 494 contained the following:
Machining Department Assembly Department
Manufacturing overhead $ 45,000 $ 70,000
Direct manufacturing labor costs $ 14,000 $ 15,000
Direct manufacturing labor- hours 1,000 1,500
Machine- hours 2,000 1,000

Compute the total manufacturing overhead costs allocated to Job 494.

3. At the end of 2009, the actual manufacturing overhead costs were $ 2,100,000 in Machining and $ 3,700,000 in Assembly. Assume that 55,000 actual machine- hours were used in Machining and that actual direct manufacturing labor costs in Assembly were $ 2,200,000. Compute the over- or underallocated manufacturing overhead for each department.

4- 21 Job costing, consulting firm. Taylor & Associates, a consulting firm, has the following condensed budget for 2009:

Revenues $ 20,000,000
Total costs:
Direct costs
Professional Labor $ 5,000,000
Indirect costs
Client support 13,000,000 18,000,000
Operating income 2,000,000

Taylor 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. Compute the 2009 budgeted indirect- cost rate for Taylor & Associates.
2. The markup rate for pricing jobs is intended to produce operating income equal to 10% of revenues. Compute the markup rate as a percentage of professional labor costs.
3. Taylor is bidding on a consulting job for Red Rooster, a fast- food chain specializing in poultry meats. The budgeted breakdown of professional labor on the job is as follows:

Professional Labor Category Budgeted Rate per Hour Budgeted Hours Director
Director $ 200 3
Partner 100 16
Associate 50 40
Assistant 30 160

Compute the budgeted cost of the Red Rooster job. How much will Taylor bid for the job if it is to earn its target operating income of 10% of revenues?

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