White Consulting, a real estate consulting firm, specializes in advising companies on potential new plant sites. The firm uses a job cost system with a predetermined indirect cost allocation rate computed as a percentage of expected direct labor costs. At the beginning of the year, managing partner Kenna White prepared the following plan, or budget, for the year: Direct labor hours (professionals). . . .16,000 hoursDirect labor costs (professionals). . . .$2,350,000Office rent. . . . . . . . . . . . . . . . . . . . . .$220,000Support staff salaries. . . . . . . . . . . . .$940,000Utilities. . . . . . . . . . . . . . . . . . . . . . . .$350,000 Tibbs Resources is inviting several consulting firms to bid for work. White estimates that this job will require about200 direct labor hours. Requirements:1. Compute WhiteConsulting's (a) hourly direct labor cost rate and (b) indirect cost allocation rate.2. Compute the predicted cost of theTibbsResources job. 3. fWhiteConsulting wants to earn a profit that equals25%of the job's cost, how much should the company bid for theTibbsResources job?

Predetermined Overhead Rate :— It is the rate used to allocate manufacturing overhead cost to cost…

Answered: White Consulting, a real estate…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter2: Job Order Costing

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White Consulting, a real estate consulting firm, specializes in advising companies on potential new plant sites. The firm uses a job cost system with a predetermined indirect cost allocation rate computed as a percentage of expected direct labor costs. At the beginning of the year, managing partner Kenna White prepared the following plan, or budget, for the year:

Direct labor hours (professionals). . . .	16,000 hours
Direct labor costs (professionals). . . .	$2,350,000
Office rent. . . . . . . . . . . . . . . . . . . . . .	$220,000
Support staff salaries. . . . . . . . . . . . .	$940,000
Utilities. . . . . . . . . . . . . . . . . . . . . . . .	$350,000

Tibbs Resources is inviting several consulting firms to bid for work. White estimates that this job will require about

200 direct labor hours.

Requirements:

1. Compute WhiteConsulting's (a) hourly direct labor cost rate and (b) indirect cost allocation rate.
2. Compute the predicted cost of the Tibbs Resources job.
3. f White Consulting wants to earn a profit that equals 25% of the job's cost, how much should the company bid for the Tibbs Resources job?

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