Concept explainers
Budgeted and actual amounts for 2017 are as follows:
- 1. Compute the direct-cost rate and the indirect-cost rate per professional labor-hour for 2017 under (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs.
Required
- 2. Which job-costing system would you recommend Cheney & Partners use? Explain.
- 3. Cheney’s 2017 audit of Pierre & Co. was budgeted to take 170 hours of professional labor time. The actual professional labor time spent on the audit was 185 hours. Compute the cost of the Pierre & Co. audit using (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs. Explain any differences in the job cost.
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Chapter 4 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Additional Business Textbook Solutions
Horngren's Accounting (12th Edition)
Horngren's Accounting (11th Edition)
Intermediate Accounting (2nd Edition)
Construction Accounting And Financial Management (4th Edition)
Financial Accounting
Principles of Accounting Volume 2
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- A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.arrow_forwardThe following describes the job responsibilities of two employees of Barney Manufacturing. Joan Dennison, Cost Accounting Manager. Joan is responsible for measuring and collecting costs associated with the manufacture of the garden hose product line. She is also responsible for preparing periodic reports that compare the actual costs with planned costs. These reports are provided to the production line managers and the plant manager. Joan helps to explain and interpret the reports. Steven Swasey, Production Manager. Steven is responsible for the manufacture of the high-quality garden hose. He supervises the line workers, helps to develop the production schedule, and is responsible for seeing that production quotas are met. He is also held accountable for controlling manufacturing costs. Required: CONCEPTUAL CONNECTION Identify Joan and Steven as line or staff and explain your reasons.arrow_forwardHobart, Evans, and Nix is a small law firm that contains 10 partners and 12 support persons. The firm employs a job-order costing system to accumulate costs chargeable to each client, and it is organized into two departments - the Research and Documents Department and the Litigation Department. The firm uses predetermined overhead rates to charge the costs of these departments to its clients. At the beginning of the year, the firm's management made the following estimates for the year:Department Research and Documents Litigation Research-hours 31,000 — Direct attorney-hours 11,800 23,400 Legal forms and supplies £ 21,100 £ 6,700 Direct lawyer cost 593,300 1,186,700 Departmental overhead cost 930,000 474,680 The predetermined overhead rate in the Research and Documents Department is based on research-hours, and the rate in the Litigation Department is based on direct lawyer cost.The costs charged to each client are made up of three elements: legal forms and supplies used, direct lawyer…arrow_forward
- Winkle, Kotter, and Zale is a small law firm that contains 10 partners and 12 support persons. The firm employs a job-order costing system to accumulate costs chargeable to each client, and it is organized into two departments—the Research and Documents Department and the Litigation Department. The firm uses predetermined overhead rates to charge the costs of these departments to its clients. At the beginning of the current year, the firm's management made the following estimates for the year: Department Researchand Documents Litigation Research-hours 20,400 - Direct attorney-hours 9,300 16,400 Materials and supplies $ 17,700 $ 5,500 Direct attorney cost $ 430,100 $ 799,400 Departmental overhead cost $ 714,000 $ 311,766 The predetermined overhead rate in the Research and Documents Department is based on research-hours, and the rate in the Litigation Department is based on direct attorney cost. The costs charged…arrow_forwardWoodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: IT tickets Employees Department direct costs Service department costs IT allocation HR allocation Total costs allocated IT IT 0 33 $ 157,000 HR HR 1,500 0 $ 247,500 Publishing 1,500 41 $ 430,000 Required: Use the direct method to allocate these service department costs to the operating departments. Note: Amounts to be deducted should be Indicated by a minus sign. Do not round Intermediate calculations. Round "Publishing" and "Binding" answers to 2 decimal places. Binding Publishing 4,500 57 $ 390,000 AL Bindingarrow_forwardCrow Design is an interior design firm. The firm uses a job cost system in which each client is a different "job."Crow Design traces direct labor, licensing costs, and travel costs directly to each job (client). It allocates indirect costs to jobs based on a predetermined indirect cost allocation rate computed as a percentage of direct labor costs. At the beginning of the current year, managing partner Brenna Gladstone prepared the following budget: Direct labor hours (professional). . . . . 8,000 hours Direct labor costs (professional). . . . . $1,600,000 Support staff salaries. . . . . . . . . . . . . . . $190,000 Computer lease payments. . . . . . . . . . . $41,000 Office supplies. . . . . . . . . . . . . . . . . . . . . $23,000 Office rent. . . . . . . . . . . . . . . . . . . . . . . . . $66,000 Later that same year in November, Crow Design served several clients. Records for two clients appear here: Fancy Food AllFood.com Direct labor hours. . . . . 680…arrow_forward
- Woodstock Binding has two service departments, IT (Information Technology) and HR (Human Resources), and two operating departments, Publishing and Binding. Management has decided to allocate IT costs on the basis of IT Tickets (issued with each IT request) in each department and HR costs on the basis of employees in each department. The following data appear in the company records for the current period: IT tickets Employees Department direct costs Service department costs IT allocation HR allocation Total costs allocated $ IT IT 0 25 $ 159,000 Required: Use the direct method to allocate these service department costs to the operating departments. Note: Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations. Round "Publishing" and "Binding" answers to 2 decimal places. HR 1,100 0 $ 247,500 0 $ HR Publishing 1,100 33 $ 430,000 0 $ Publishing Binding 3,300 49 $ 390,000 0.00 $ Binding 0.00arrow_forwardAlpesharrow_forwardElizabeth Flanigan and Associates is an engineering and design firm that specializes in developing plans for recycling plants for municipalities. The firm uses a job costing system to accumulate the cost associated with each design project. Flanigan employs three levels of employee: senior engineers, associate engineers, and clerical staff. The salary cost of the senior en- gineers and the associate engineers is assigned to each project as direct labor. The salary cost of the clerical staff is included in overhead, along with the cost of engineering supplies, automobile travel, and equipment depreciation. The cost of airline travel, motels, building permits, and fees from other consultants is charged to each project as direct materials. Overhead is applied to projects using a predetermined overhead rate based on total engineering hours. The rate is $5 per hour. The six different salary levels for the employees of Elizabeth Flanigan and Associates are listed below. The hourly rate is…arrow_forward
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