Tropico Services is a landscaping firm located in Nadi. The following costs were incurred in the firm’s contract to beautify the local hotels: Direct material $4 800 Professional labour $13 000 The firm’s budget for the year included the following estimates: Budgeted overhead $900 000 Budgeted professional labour $600 000 F) Which method would you recommend for estimating client fees? Explain your answer.
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Tropico Services is a landscaping firm located in Nadi. The following costs were incurred in the firm’s contract to beautify the local hotels: Direct material $4 800 Professional labour $13 000 The firm’s budget for the year included the following estimates: Budgeted
F) Which method would you recommend for estimating client fees? Explain your answer.
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- Biotechtron, Inc., has two research laboratories in the Southwest, one in Yuma, Arizona, and the other in Bernalillo, New Mexico. The owner of Biotechtron centralized the legal services function in the Yuma office and had both laboratories send any legal questions or issues to the Yuma office. The legal services support center has budgeted fixed costs of 160,000 per year and a budgeted variable rate of 65 per hour of professional time. The normal usage of the legal services center is 2,600 hours per year for the Yuma office and 1,400 hours per year for the Bernalillo office. This corresponds to the expected usage for the coming year. Required: 1. Determine the amount of legal services support center costs that should be assigned to each office. 2. Since the offices produce services, not tangible products, what purpose is served by allocating the budgeted costs? 3. Now, assume that during the year, the legal services center incurred actual fixed costs of 163,000 and actual variable costs of 272,400. It delivered 4,180 hours of professional time2,580 hours to Yuma and 1,600 hours to Bernalillo. Determine the amount of the legal services centers costs that should be allocated to each office. Explain the purposes of this allocation. 4. Did the costs allocated differ from the costs incurred by the legal services center? If so, why?Design Arts Associates is an interior decorating firm in Berlin. The following costs were incurred in the firm’s contract to redecorate the mayor’s offices. Direct material used 3,000 euros Direct professional labor 6,000 euros The firm’s budget for the year included the following estimates: Budgeted overhead 400,000 euros Budgeted direct professional labor 250,000 euros Overhead is applied to contracts using a predetermined overhead rate calculated annually. The rate is based on direct professional labor cost. Required:Calculate the total cost of the firm’s contract to redecorate the mayor’s offices.Design Arts Associates is an interior decorating firm in Berlin. The following costs were incurred in the firm’s contract to redecorate the mayor’s offices. Direct material used .....................................................................................3,500 eurosDirect professional labor .............................................................................6,000 euros The firm’s budget for the year included the following estimates: Budgeted overhead ...............................................................................400,000 eurosBudgeted direct professional labor .................................................250,000 euros Overhead is applied to contracts using a predetermined overhead rate calculated annually. The rate is based on direct professional labor cost.Required: Calculate the total cost of the firm’s contract to redecorate the mayor’s offices. (Remember to express your answer in terms of euros.)
- Service Costing Tropico Services is a landscaping firm located in Nadi. The following costs were incurred in the firm’s contract to beautify the local hotels: Direct material $4 800 Professional labour $13 000 The firm’s budget for the year included the following estimates: Budgeted overhead $900 000 Budgeted professional labour $600 000 REQUIRED: Show ALL workings Calculate the fee charged to beautify the hotels, assuming that the firm uses a chargeout rate of $360 per professional labour hour (which includes a profit margin of 42 per cent) and 110 hours are worked on this contract. Materials are charged to the client at cost. Explain the key differences between this approach to estimating service fees and the method described in above. Which method would you recommend for estimating client fees? Explain your answer.a. Eye for detail is an interior decorating firm located in sydney. The following costs were incurred in the firms contract to redecorate the local council offices: direct material $5,600 Professional labour 12 000 The firms budget for the year included the following estimates: Budgeted overhed $800,000 Budgeted proffesional labour 500,000 1. Calculate the total cost of the firms contract to redcorate the council offices. Overhead is applied to contracts using a predetermined overhead rate, calculated annually, based on the professional labour cost. Materials are charged directly to each contract 2. Using the total cost to calculate a service fee, assuming that the company adds a 40 per cent profit margin to total cost. b. Refer to the information for a. 1. Calculate the fee charged to redecorate the council offices assuming that the firm uses a chargeout rate of $360 per professional labour hour, which includes a profit margin of 40 per cent, and 120 hours are worked on the…Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year. Commercial Residential Revenues $300,700 $483,000 Direct materials costs $29,500 $50,500 Direct labor costs 100,400 289,500 Overhead costs 90,900 220,800 150,000 490,000 Operating income (loss) $79,900 $(7,000) The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to…
- Sunshine Company sells custom made surf boards in California. The finance manager has supplied the following data from its activity-based costing system: Overhead Costs Staff Salaries $500,000 Selling and administration overheads 200,000 Total Overhead Costs $700,000 Activity Cost Pool Activity Measure Total Activity for the Year Product design Number of new designs 500 new designs Order Processing Number of Customer orders 700 orders Customer Support Number of Customers 400 customers Others Organization sustaining activity Not applicable Distribution of Resource Consumption across Activities Product Design Order Processing Customer Support Other Total Staff Salaries 40% 30% 20% 10% 100% Selling and administration overheads 30% 10% 20% 40% 100% During the year Sunshine Company completed three individual orders for a new customer, Tarpaper…A local engineering firm is bidding on a design project for a new client. The total budgeted direct-labor costs for the firm are $600,000. The total budgeted indirect costs are $800,000. It is estimated that there are 10,000 billable hours in total. a. What is the budgeted direct-labor cost rate? b. What is the budgeted indirect-cost rate assuming direct-labor cost is the allocation base? c. What should be the engineering firm bid on the project if the direct labor hours are estimated at 300 hours?Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year. Commercial Residential Revenues $295,000 $475,000 Direct materials costs $29,000 $49,000 Direct labor costs 99,000 287,500 Overhead costs 80,000 208,000 149,000 485,500 Operating income (loss) $87,000 $(10,500) The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to…
- Consider the budget information for Bert and Ernie Design firm: Professional labor $1,000,000 Administrative labor 200,000 Lease expense 50,000 Design equipment depreciation 25,000 Samples and books 10,000 Utilities 20,000 Professional hours 100,000 hours Number of rooms redone 2,000 rooms Bert and Ernie decide there are two cost pools, design support, which is assigned to jobs based on the number of rooms redone, and facilities costs, which is assigned to jobs based on the number of professional labor hours. The design support cost pool includes design equipment depreciation and samples and books. The lease expense and utilities are considered facilities costs. What is the budgeted rate per cost driver for design support?Pita Bread Ltd has two production departments, Assembly and Finishing, and two service departments, Stores and Maintenance. The company has budgeted the following costs for the forthcoming period. Assembly Finishing Stores Maintain Allocation Indirect Material 15,250 13,500 12,650 14,000 Allocation Indirect Labour 10,250 5,600 5,520 7,500 Overheads Depreciation of equipment 58,000 Plant insurance 88,000 Heat and light 75,000 Canteen costs 24,000 Rent 50,000 Supervision 80,000 The following information is also available: Assembly Finishing Stores Maintain Total Floor Area sm 10,000 10,000 2,500 2,500 Employees 40 20 10 10 Plant book value $100,000 $100,000 $40,000 $50,000 Depreciation per annum 30% 30% 20% 20% Machine Hours 60,000 40,000 - - Stores Requisition $200,000 $300,000…The Meyers CPA firm has the following overhead budget for the year: Overhead Indirect materials $ 350,000 Indirect labor 1,675,000 Depreciation—Building 303,000 Depreciation—Furniture 35,000 Utilities 310,000 Insurance 39,000 Property taxes 53,000 Other expenses 145,000 Total $ 2,910,000 The firm estimates total direct labor cost for the year to be $1,818,750. The firm uses direct labor cost as the cost driver to apply overhead to clients. During January, the firm worked for many clients; data for two of them follow: Gargus account Direct labor $ 3,000 Feller account Direct labor $ 9,000 Required: 1. Compute the firm’s predetermined overhead rate. 2. Compute the amount of overhead to be charged to the Gargus and Feller accounts using the predetermined overhead rate calculated in requirement 1. 3. Compute total job cost for the Gargus account and the Feller account.