Required: 1. What overhead costs should be assigned to each branch based on ABC concepts? 2. What is the contribution of each branch before subtracting the results obtained in requirement 1? 3. What is the profitability of each branch office using ABC? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What overhead costs should be assigned to each branch based on ABC concepts? (Do not round intermediate calculations. Enter your answers in thousands of dollars, rounded to two decimal places.) Activity-based Overhead Allocation General administration Project costing Accounts payable/receiving Accounts receivable Payroll/Mail sort and delivery Personnel recruiting Employee insurance processing Proposals Direct labor cost Timesheet entries Vendor Invoices Client invoices Employees New hires Insurance claims filed (in thousands) Cost Driver Columbus Cincinnati Dayton Total $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Proposals Sales meetings/Sales aids Contracted sales Shipping Projects shipped Ordering Purchase orders Duplicating costs Copies duplicated Blueprinting Blueprints Total Required Information [The following Information applies to the questions displayed below.] Miami Valley Architects Inc. provides a wide range of engineering and architectural consulting services through its three branch offices in Columbus, Cincinnati, and Dayton, Ohio. The company allocates resources and bonuses to the three branches based on the net Income of the period. The results of the firm's performance for the most recent year follows ($ In thousands): Sales Less: Direct labor Columbus $ 1,500 Cincinnati $ 1,419 Dayton $ 1,067 Total $ 3,986 382 317 317 1,016 Direct materials Overhead 281 421 185 710 589 589 887 1,888 Net income $ 127 $ 92 $ (24) $ 195 Miami Valley accumulates overhead Items in one overhead pool and allocates it to the branches based on direct labor dollars. For this year, the predetermined overhead rate was $1.859 for every direct labor dollar Incurred by an office. The overhead pool includes rent, depreciation, and taxes, regardless of which office Incurred the expense. Some branch managers complain that the overhead allocation method forces them to absorb a portion of the overhead Incurred by the other offices. Management is concerned with the recent operating results. During a review of overhead expenses, management noticed that many overhead Items were clearly not correlated to the movement in direct labor dollars as previously assumed. Management decided that applying overhead based on activity-based costing and direct tracing wherever possible should provide a more accurate picture of the profitability of each branch. An analysis of the overhead revealed that the following dollars for rent, utilities, depreciation, and taxes could be traced directly to the office that incurred the overhead ($ in thousands): Direct overhead Columbus $ 180 Cincinnati $ 270 Dayton $ 177 Total $ 627 Activity pools and their corresponding cost drivers were determined from the accounting records and staff surveys as follows: General administration $ 409,000 Project costing Accounts payable/receiving Accounts receivable Payroll/Mail sort and delivery Personnel recruiting Employee insurance processing Proposals Sales meetings/Sales aids Shipping Ordering Duplicating costs Blueprinting 48,000 139,000 47,000 30,000 38,000 14,000 139,000 202,000 24,000 48,000 46,000 77,000 $ 1,261,000

Required: 1. What overhead costs should be assigned to each branch based on ABC concepts? 2. What is the contribution of each branch before subtracting the results obtained in requirement 1? 3. What is the profitability of each branch office using ABC? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What overhead costs should be assigned to each branch based on ABC concepts? (Do not round intermediate calculations. Enter your answers in thousands of dollars, rounded to two decimal places.) Activity-based Overhead Allocation General administration Project costing Accounts payable/receiving Accounts receivable Payroll/Mail sort and delivery Personnel recruiting Employee insurance processing Proposals Direct labor cost Timesheet entries Vendor Invoices Client invoices Employees New hires Insurance claims filed (in thousands) Cost Driver Columbus Cincinnati Dayton Total $ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Proposals Sales meetings/Sales aids Contracted sales Shipping Projects shipped Ordering Purchase orders Duplicating costs Copies duplicated Blueprinting Blueprints Total Required Information [The following Information applies to the questions displayed below.] Miami Valley Architects Inc. provides a wide range of engineering and architectural consulting services through its three branch offices in Columbus, Cincinnati, and Dayton, Ohio. The company allocates resources and bonuses to the three branches based on the net Income of the period. The results of the firm's performance for the most recent year follows ($ In thousands): Sales Less: Direct labor Columbus $ 1,500 Cincinnati $ 1,419 Dayton $ 1,067 Total $ 3,986 382 317 317 1,016 Direct materials Overhead 281 421 185 710 589 589 887 1,888 Net income $ 127 $ 92 $ (24) $ 195 Miami Valley accumulates overhead Items in one overhead pool and allocates it to the branches based on direct labor dollars. For this year, the predetermined overhead rate was $1.859 for every direct labor dollar Incurred by an office. The overhead pool includes rent, depreciation, and taxes, regardless of which office Incurred the expense. Some branch managers complain that the overhead allocation method forces them to absorb a portion of the overhead Incurred by the other offices. Management is concerned with the recent operating results. During a review of overhead expenses, management noticed that many overhead Items were clearly not correlated to the movement in direct labor dollars as previously assumed. Management decided that applying overhead based on activity-based costing and direct tracing wherever possible should provide a more accurate picture of the profitability of each branch. An analysis of the overhead revealed that the following dollars for rent, utilities, depreciation, and taxes could be traced directly to the office that incurred the overhead ($ in thousands): Direct overhead Columbus $ 180 Cincinnati $ 270 Dayton $ 177 Total $ 627 Activity pools and their corresponding cost drivers were determined from the accounting records and staff surveys as follows: General administration $ 409,000 Project costing Accounts payable/receiving Accounts receivable Payroll/Mail sort and delivery Personnel recruiting Employee insurance processing Proposals Sales meetings/Sales aids Shipping Ordering Duplicating costs Blueprinting 48,000 139,000 47,000 30,000 38,000 14,000 139,000 202,000 24,000 48,000 46,000 77,000 $ 1,261,000

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 21BEB

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