The Meyers CPA firm has the following overhead budget for the year: Overhead Indirect materials $ 350,000 Indirect labor 1,675,000 Depreciation—Building 303,000 Depreciation—Furniture 35,000 Utilities 310,000 Insurance 39,000 Property taxes 53,000 Other expenses 145,000 Total $ 2,910,000 The firm estimates total direct labor cost for the year to be $1,818,750. The firm uses direct labor cost as the cost driver to apply overhead to clients. During January, the firm worked for many clients; data for two of them follow: Gargus account Direct labor $ 3,000 Feller account Direct labor $ 9,000 Required: 1. Compute the firm’s predetermined overhead rate. 2. Compute the amount of overhead to be charged to the Gargus and Feller accounts using the predetermined overhead rate calculated in requirement 1. 3. Compute total job cost for the Gargus account and the Feller account.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
The Meyers CPA firm has the following
| Overhead | |||
| Indirect materials | $ | 350,000 | |
| Indirect labor | 1,675,000 | ||
| 303,000 | |||
| Depreciation—Furniture | 35,000 | ||
| Utilities | 310,000 | ||
| Insurance | 39,000 | ||
| Property taxes | 53,000 | ||
| Other expenses | 145,000 | ||
| Total | $ | 2,910,000 | |
The firm estimates total direct labor cost for the year to be $1,818,750. The firm uses direct labor cost as the cost driver to apply overhead to clients.
During January, the firm worked for many clients; data for two of them follow:
| Gargus account | |||
| Direct labor | $ | 3,000 | |
| Feller account | |||
| Direct labor | $ | 9,000 | |
Required:
1. Compute the firm’s predetermined overhead rate.
2. Compute the amount of overhead to be charged to the Gargus and Feller accounts using the predetermined overhead rate calculated in requirement 1.
3. Compute total
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