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Overheads, Job Costing, Budgets

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.

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