Job costing with multiple direct-cost categories, multiple indirect-cost pools, law firm (continuation of 5-31 and 5-32). Wharton has two classifications of professional staff: partners and associates. Peyton asks his assistant to examine the relative use of partners and associates on the recent Steger Enterprises and Bluestone Inc. jobs. The Steger Enterprises job used 1,000 partner-hours and 2,000 associate-hours. The Bluestone Inc. job used 1,500 partner-hours and 500 associate-hours. Therefore, totals of the two jobs together were 2,500 partner-hours and 2,500 associate-hours. Peyton decides to examine how using separate direct-cost rates for partners and associates and using separate indirect-cost pools for partners and associates would have affected the costs of the Steger Enterprises and Bluestone Inc. jobs. Indirect costs in each indirect-cost pool would be allocated on the basis of total hours of that category of professional labor. From the total indirect cost-pool of $200,000, $120,000 is attributable to the activities of partners and $80,000 is attributable to the activities of associates. The rates per category of professional labor are as follows: Category of Professional Labor Direct Cost per Hour Indirect Cost per Hour Partner $200 $120,000 ÷ 2,500 hours = $48 Associate $120 $ 80,000 ÷ 2,500 hours = $32 1. Compute the costs of the Steger Enterprises and Bluestone Inc. jobs using Wharton’s further refined system, with multiple direct-cost categories and multiple indirect-cost pools. Required 2. For what decisions might Wharton Associates find it more useful to use this job-costing approach rather than the approaches in Problem 5-31 or 5-32?
Job costing with multiple direct-cost categories, multiple indirect-cost pools, law firm (continuation of 5-31 and 5-32). Wharton has two classifications of professional staff: partners and associates. Peyton asks his assistant to examine the relative use of partners and associates on the recent Steger Enterprises and Bluestone Inc. jobs. The Steger Enterprises job used 1,000 partner-hours and 2,000 associate-hours. The Bluestone Inc. job used 1,500 partner-hours and 500 associate-hours. Therefore, totals of the two jobs together were 2,500 partner-hours and 2,500 associate-hours. Peyton decides to examine how using separate direct-cost rates for partners and associates and using separate indirect-cost pools for partners and associates would have affected the costs of the Steger Enterprises and Bluestone Inc. jobs. Indirect costs in each indirect-cost pool would be allocated on the basis of total hours of that category of professional labor. From the total indirect cost-pool of $200,000, $120,000 is attributable to the activities of partners and $80,000 is attributable to the activities of associates. The rates per category of professional labor are as follows: Category of Professional Labor Direct Cost per Hour Indirect Cost per Hour Partner $200 $120,000 ÷ 2,500 hours = $48 Associate $120 $ 80,000 ÷ 2,500 hours = $32 1. Compute the costs of the Steger Enterprises and Bluestone Inc. jobs using Wharton’s further refined system, with multiple direct-cost categories and multiple indirect-cost pools. Required 2. For what decisions might Wharton Associates find it more useful to use this job-costing approach rather than the approaches in Problem 5-31 or 5-32?
Solution Summary: The author explains job order costing, which is a method of finding out the cost of an individual job or batches of jobs in the manufacturing firm where different products or unique products are manufactured simultaneously.
Job costing with multiple direct-cost categories, multiple indirect-cost pools, law firm (continuation of 5-31 and 5-32). Wharton has two classifications of professional staff: partners and associates. Peyton asks his assistant to examine the relative use of partners and associates on the recent Steger Enterprises and Bluestone Inc. jobs. The Steger Enterprises job used 1,000 partner-hours and 2,000 associate-hours. The Bluestone Inc. job used 1,500 partner-hours and 500 associate-hours. Therefore, totals of the two jobs together were 2,500 partner-hours and 2,500 associate-hours. Peyton decides to examine how using separate direct-cost rates for partners and associates and using separate indirect-cost pools for partners and associates would have affected the costs of the Steger Enterprises and Bluestone Inc. jobs. Indirect costs in each indirect-cost pool would be allocated on the basis of total hours of that category of professional labor. From the total indirect cost-pool of $200,000, $120,000 is attributable to the activities of partners and $80,000 is attributable to the activities of associates.
The rates per category of professional labor are as follows:
Category of Professional Labor
Direct Cost per Hour
Indirect Cost per Hour
Partner
$200
$120,000 ÷ 2,500 hours = $48
Associate
$120
$ 80,000 ÷ 2,500 hours = $32
1. Compute the costs of the Steger Enterprises and Bluestone Inc. jobs using Wharton’s further refined system, with multiple direct-cost categories and multiple indirect-cost pools.
Required
2. For what decisions might Wharton Associates find it more useful to use this job-costing approach rather than the approaches in Problem 5-31 or 5-32?
Definition Definition Accounting technique that tracks the costs of materials, labor, and overhead for a particular job. The main purpose of job costing is to determine the profit or loss for each job. Repetitive work or poorly allocated employees can be addressed for the upcoming project through job costing.
The following were selected from among the transactions completed by Babcock Company during November of the current year:
Nov.
3
Purchased merchandise on account from Moonlight Co., list price $85,000, trade discount 25%, terms FOB destination, 2/10, n/30.
4
Sold merchandise for cash, $37,680. The cost of the goods sold was $22,600.
5
Purchased merchandise on account from Papoose Creek Co., $47,500, terms FOB shipping point, 2/10, n/30, with prepaid freight of $810 added to the invoice.
6
Returned merchandise with an invoice amount of $13,500 ($18,000 list price less trade discount of 25%) purchased on November 3 from Moonlight Co.
8
Sold merchandise on account to Quinn Co., $15,600 with terms n/15. The cost of the goods sold was $9,400.
13
Paid Moonlight Co. on account for purchase of November 3, less return of November 6.
14
Sold merchandise with a list price of $236,000 to customers who used VISA and who redeemed $8,000 of pointof- sale coupons. The cost…
Hello teacher please solve this questions
Help me to solve this questions
Chapter 5 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.