Horton, Reiser, and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is provided for the year 2016.EstimatedOverhead Cost Drivers per Activity$ 31,500 900 research hoursExpected Use efActivity Cost PoolsResearching legal issuesPreparing legal documents480,000 30,000 pegesMeeting with clients1,760,0008,800 professional hoursDuring 2016 the firm worked 660 research hours, prepared 25,000 document pages, and 10,000 professional hoursCompute the total overhead applied during 2016.

Name: Horton, Reiser, and Associates, a law firm, employs ABC. The followin
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Description: Horton, Reiser, and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is provided for the year 2016.EstimatedOverhead Cost Drivers per Activity$ 31,500 900 research hoursExpected Use efActivity Cost

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Horton, Reiser, and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is provided for the year 2016. Estimated Activity Cost Pools Overhead Cost Drivers per Activity Expected Use of Researching legal issues Preparing legal documents $ 31,500 480,000 30,000 peges 900 research hours Mesting with clients 1,760,000 8,800 professional hours During 2016 the firm worked 660 research hours, prepared 25,000 document pages, and 10,000 professional hours. Compute the total overhead applied during 2016.

Horton, Reiser, and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is provided for the year 2016. Estimated Activity Cost Pools Overhead Cost Drivers per Activity Expected Use of Researching legal issues Preparing legal documents $ 31,500 480,000 30,000 peges 900 research hours Mesting with clients 1,760,000 8,800 professional hours During 2016 the firm worked 660 research hours, prepared 25,000 document pages, and 10,000 professional hours. Compute the total overhead applied during 2016.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 28E: Minor Co. has a job order cost system and applies overhead based on departmental rates. Service...

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Nozama.com Inc. sells consumer electronics over the Internet. For the next period, the budgeted cost of the sales order processing activity is 250,000 and 50,000 sales orders are estimated to be processed. a. Determine the activity rate of the sales order processing activity. b. Determine the amount of sales order processing cost associated with 30,000 sales orders.
Friendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application) and number of applications. The bank controller has accumulated the following data for the setup activity: Required: 1. Estimate a regression equation with application hours as the activity driver and the only independent variable. If the bank forecasts 2,600 application hours for the next month, what will be the budgeted application cost? 2. Estimate a regression equation with number of applications as the activity driver and the only independent variable. If the bank forecasts 80 applications for the next month, what will be the budgeted application cost? 3. Which of the two regression equations do you think does a better job of predicting application costs? Explain. 4. Run a multiple regression to determine the cost equation using both activity drivers. What are the budgeted application costs for 2,600 application hours and 80 applications?
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity: Four welding units, with a lease cost of 12,000 per year per unit Six welding employees each paid a salary of 50,000 per year (A total of 9,000 welding hours are supplied by the six workers.) Welding supplies: 300 per job Welding hours: Three hours used per job During the year, the activity operated at 90 percent of capacity and incurred the actual activity and resource costs, shown on page 676. Lease cost: 48,000 Salaries: 315,000 Parts and supplies: 805,000 Required: 1. Prepare a flexible budget formula for the welding activity using welding hours as the driver. 2. Prepare a performance report for the welding activity. 3. What if welders were hired through outsourcing and paid 30 per hour (the welding equipment is provided by Foy)? Repeat Requirement 1 for the outsourcing case.
Professional labor cost budget Based on the data in Exercise 13-5 and assuming that the average compensation per hour for staff is $36 and for partners is $300. prepare a professional labor cost budget for Day & Spieth, CPAs, for the year ending March 31. 20Y6. Use the following column headings:
Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 20X1: During 20X1, Marston worked a total of 80,000 direct labor hours, used 250,000 machine hours, made 32,000 moves, and performed 120 batch inspections. The following actual costs were incurred: Marston applies overhead using rates based on direct labor hours, machine hours, number of moves, and number of batches. The second level of activity (the right column in the preceding table) is the practical level of activity (the available activity for resources acquired in advance of usage) and is used to compute predetermined overhead pool rates. Required: 1. Prepare a performance report for Marstons manufacturing costs in the current year. 2. Assume that one of the products produced by Marston is budgeted to use 10,000 direct labor hours, 15,000 machine hours, and 500 moves and will be produced in five batches. A total of 10,000 units will be produced during the year. Calculate the budgeted unit manufacturing cost. 3. One of Marstons managers said the following: Budgeting at the activity level makes a lot of sense. It really helps us manage costs better. But the previous budget really needs to provide more detailed information. For example, I know that the moving materials activity involves the use of forklifts and operators, and this information is lost when only the total cost of the activity for various levels of output is reported. We have four forklifts, each capable of providing 10,000 moves per year. We lease these forklifts for five years, at 10,000 per year. Furthermore, for our two shifts, we need up to eight operators if we run all four forklifts. Each operator is paid a salary of 30,000 per year. Also, I know that fuel costs about 0.25 per move. Assuming that these are the only three items, expand the detail of the flexible budget for moving materials to reveal the cost of these three resource items for 20,000 moves and 40,000 moves, respectively. Based on these comments, explain how this additional information can help Marston better manage its costs. (Especially consider how activity-based budgeting may provide useful information for non-value-added activities.)
Mesa Aquatics, Inc. estimated direct labor hours as 1,900 in quarter 1, 2,000 in quarter 2.2,200 in quarter 3, and 1,800 in quarter 4. a sales and administration budget using the information provided.
Greiner Company makes and sells high-quality glare filters for microcomputer monitors. John Craven, controller, is responsible for preparing Greiners master budget and has assembled the following data for the coming year. The direct labor rate includes wages, all employee-related benefits, and the employers share of FICA. Labor saving machinery will be fully operational by March. Also, as of March 1, the companys union contract calls for an increase in direct labor wages that is included in the direct labor rate. Greiner expects to have 5,600 glare filters in inventory on December 31 of the current year, and has a policy of carrying 35 percent of the following month's projected sales in inventory. Information on the first four months of the coming year is as follows: Required: 1. Prepare the following monthly budgets for Greiner Company for the first quarter of the coming year. Be sure to show supporting calculations. a. Production budget in units b. Direct labor budget in hours c. Direct materials cost budget d. Sales budget 2. Calculate the total budgeted contribution margin for Greiner Company by month and in total for the first quarter of the coming year. Be sure to show supporting calculations. (CMA adapted)
Firenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Previously, Sanjay Bhatt, Firenza Companys controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 40 percent markup over full manufacturing cost. Required: 1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates? 3. Which bids are more accurate? Why?
Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?
Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold through specialty golf shops. The company is in the process of developing itsoperating budget for the coming year. Selected data regarding the companys two products areas follows: Manufacturing overhead is applied to units using direct labor hours. Variable manufacturing overhead Ls projected to be 25,000, and fixed manufacturing overhead is expected to be15,000. The estimated cost to produce one unit of the laminated putter head is: a. 42. b. 46. c. 52. d. 62.
Professional labor cost budget for a service company Based on the data in Exercise 7 and assuming that the average compensation per hour for staff is 40 and for partners is 175, prepare a professional labor cost budget for each department forLundquist Fretwell, CPAs, for the year ending May 31, 20Y8. Use the following column headings:
Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects sales of 15.9 million and cost of goods sold of 8.75 million. Advertising is a key part of Coral Seas business strategy, and total marketing expense for the year is budgeted at 2.8 million. Total administrative expenses are expected to be 675,000. Coral Seas has no interest expense. Income taxes are paid at the rate of 40 percent of operating income. Required: 1. Construct a budgeted income statement for Coral Seas Jewelry Company for the coming year. 2. What if Coral Seas had interest payments of 500,000 during the year? What effect would that have on operating income? On income before taxes? On net income?