Nnama Accounting Services performs two types of services: Consulting and Tax Preparation. Nnama's overhead costs consist of software support ($250,000) and legal assistance ($150,000). Information on the two services is as follows: Category Consulting Tax Preparation Direct Labor Cost $60,000 System Usage Minutes 50,000 Legal Hours Used 250 $120,000 15,000 850 Using the traditional costing method, how much overhead should be applied to Consulting Services?

Nnama Accounting Services performs two types of services: Consulting and Tax Preparation. Nnama's overhead costs consist of software support ($250,000) and legal assistance ($150,000). Information on the two services is as follows: Category Consulting Tax Preparation Direct Labor Cost $60,000 System Usage Minutes 50,000 Legal Hours Used 250 $120,000 15,000 850 Using the traditional costing method, how much overhead should be applied to Consulting Services?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of the firm wide overhead costs to the labor cost of the consultants on the engagement. The overhead costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Mackenzie Consulting’s overhead costs are $5 million per year, and total consultant labor cost is estimated at $2.5 million per year. Required (a) What is Mackenzie Consulting’s cost driver rate? (b) If the consultant labor cost on an engagement is $25,000, what cost will Mackenzie Consulting compute as the total cost of the consulting engagement?
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A company uses charging rates to allocate service department costs to the using departments. The accountant compiled the following information on one of the service departments: If Department K plans to use 1,350 hours of the service departments service in the coming year, how much of the service departments cost is allocated to Department K? a. 3,375 b. 27,300 c. 26,325 d. 23,950
Hicks Contracting collects and analyzes cost data in order to track the cost of installing decks on new home construction jobs. The following are some of the costs that they incur. Classify these costs as fixed or variable costs and as product or period costs. Lumber used to construct decks ($12.00 per square foot) Carpenter labor used to construct decks ($10 per hour) Construction supervisor salary ($45,000 per year) Depreciation on tools and equipment ($6,000 per year) Selling and administrative expenses ($35,000 per year) Rent on corporate office space ($34,000 per year) Nails, glue, and other materials required to construct deck (varies per job)