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Budgeting, service company. Ever Clean Company provides gutter cleaning services to residential clients. The company has enjoyed considerable growth in recent years due to a successful marketing campaign and favorable reviews on service-rating Web sites. Ever Clean owner Joanne Clark makes sales calls herself and quotes on jobs based on length of gutter surface. Ever Clean hires college students to drive the company vans to jobs and clean the gutters. A part-time bookkeeper takes care of billing customers and other office tasks.
Joanne Clark estimates that her gutter cleaners will work a total of 1,000 jobs during the year. Each job averages 600 feet of gutter surface and requires 12 direct labor-hours. Clark pays her gutter cleaners $15 per hour, inclusive of taxes and benefits. The following table presents the budgeted overhead costs for 2018:
Variable costs | |
Supplies ($6.50 per DLH) | $ 78,000 |
Fixed costs (to support capacity of 12,000 DLH) | |
Indirect labor | 25,000 |
Depreciation | 17,000 |
Other | 24,000 |
Total budgeted costs | $144,000 |
- 1. Prepare a direct labor budget in both hours and dollars.
- 2. Calculate the budgeted overhead allocation rate based on the budgeted quantity of the cost drivers.
- 3. Calculate the budgeted total cost of all jobs for the year and the budgeted cost of an average 600-foot gutter-cleaning job.
- 4. Prepare a revenues budget for the year assuming that Ever Clean charges customers $0.60 per square foot.
- 5. Calculate the budgeted operating income.
- 6. What actions can Clark take if sales should decline to 900 jobs annually?
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Chapter 6 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
- Selected comparative financial statements of Korbin Company follow. Sales KORBIN COMPANY Comparative Income Statements For Years Ended December 31 2021 2020 $ 512,008 $ 392,240 2019 $ 272,200 Cost of goods sold 308,229 245,542 174,208 Gross profit 203,779 146,698 97,992 Selling expenses 72,705 54,129 35,930 Administrative expenses 46,081 34,517 22,593 Total expenses 118,786 88,646 58,523 Income before taxes .84,993 58,052 39,469 Income tax expense 15,809 11,901 8,012 Net income $ 69,184 $ 46,151 $ 31,457 KORBIN COMPANY Comparative Balance Sheets Assets Current assets Long-term investments Plant assets, net Total assets Liabilities and Equity Current liabilities Common stock Other paid-in capital Retained earnings December 31 2021 2020 2019 $ 54,370 0 $ 36,390 600 $ 48,645 3,870 99,436 90,776 53,339 Total liabilities and equity $ 153,806 $ 127,766 $ 105,854 $ 22,456 $ 19,037 $ 18,524 68,000 68,000 50,000 8,500 8,500 5,556 54,850 32,229 31,774 $ 153,806 $ 127,766 $ 105,854arrow_forwardprovide correct answer mearrow_forwardgeneral accountingarrow_forward
- E3-17 (Algo) Calculating Equivalent Units, Unit Costs, and Cost Assigned (Weighted-Average Method) [LO 3-2] Vista Vacuum Company has the following production Information for the month of March. All materials are added at the beginning of the manufacturing process. Units . • Beginning Inventory of 3,500 units that are 100 percent complete for materials and 28 percent complete for conversion. 14,600 units started during the period. Ending Inventory of 4,200 units that are 14 percent complete for conversion. Manufacturing Costs Beginning Inventory was $20,500 ($10,100 materials and $10,400 conversion costs). Costs added during the month were $28,400 for materials and $51,500 for conversion ($26.700 labor and $24,800 applied overhead). Assume the company uses Weighted-Average Method. Required: 1. Calculate the number of equivalent units of production for materials and conversion for March. 2. Calculate the cost per equivalent unit for materials and conversion for March. 3. Determine the…arrow_forwardNonearrow_forwardAccounting questionarrow_forward
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