Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 4, Problem 4.26E

Job costing, consulting firm. Frontier Partners, a management consulting firm, has the following condensed budget for 2017:

Revenues   $50,000,000
Total costs:    
Direct costs    
Professional Labor $ 20,000,000  
Indirect costs    
Client support 25,000,000 45,000,000
Operating income   $ 5,000,000

Frontier has a single direct-cost category (professional labor) and a single indirect-cost pool (client support). Indirect costs are allocated to jobs on the basis of professional labor costs.

  1. 1. Prepare an overview diagram of the job-costing system. Calculate the 2017 budgeted indirect-cost rate for Frontier Partners.

  Required

  1. 2. The markup rate for pricing jobs is intended to produce operating income equal to 10% of revenues. Calculate the markup rate as a percentage of professional labor costs.
  2. 3. Frontier is bidding on a consulting job for Sentinel Communications, a wireless communications company. The budgeted breakdown of professional labor on the job is as follows:
Professional Labor Category Budgeted Rate per Hour Budgeted Hours
Director $200 9
Partner 100 24
Associate 50 100
Assistant 30 220

Calculate the budgeted cost of the Sentinel Communications job. How much will Frontier bid for the job if it is to earn its target operating income of 10% of revenues?

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Chapter 4 Solutions

Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)

Ch. 4 - Comment on the following statement: In a...Ch. 4 - Describe three different debit entries to the...Ch. 4 - Describe three alternative ways to dispose of...Ch. 4 - When might a company use budgeted costs rather...Ch. 4 - Prob. 4.15QCh. 4 - Which of the following does not accurately...Ch. 4 - Sturdy Manufacturing Co. assembled the following...Ch. 4 - For which of the following industries would...Ch. 4 - ABC Company uses job-order costing and has...Ch. 4 - Under Stanford Corporations job costing system,...Ch. 4 - (10 min) Job costing, process costing. In each of...Ch. 4 - Actual costing, normal costing, accounting for...Ch. 4 - Job costing, normal and actual costing. Atkinson...Ch. 4 - Budgeted manufacturing overhead rate, allocated...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Job costing, consulting firm. Frontier Partners, a...Ch. 4 - Time period used to compute indirect cost rates....Ch. 4 - Accounting for manufacturing overhead. Creative...Ch. 4 - Job costing, journal entries. The University of...Ch. 4 - Journal entries, T-accounts, and source documents....Ch. 4 - Job costing, journal entries. Donald Transport...Ch. 4 - Job costing, unit cost, ending work in process....Ch. 4 - Job costing; actual, normal, and variation from...Ch. 4 - Job costing; variation on actual, normal, and...Ch. 4 - Proration of overhead. The Ride-On-Wave Company...Ch. 4 - Job costing, accounting for manufacturing...Ch. 4 - Service industry, job costing, law firm. Kidman ...Ch. 4 - Service industry, job costing, two direct- and two...Ch. 4 - Proration of overhead. (Z. Iqbal, adapted) The Zaf...Ch. 4 - Normal costing, overhead allocation, working...Ch. 4 - Proration of overhead with two indirect cost...Ch. 4 - General ledger relationships, under- and...Ch. 4 - Overview of general ledger relationships. Estevez...Ch. 4 - Allocation and proration of overhead. Resource...Ch. 4 - (2530 min.) Job costing, ethics. Joseph Underwood...Ch. 4 - Job costingservice industry. Market Pulse performs...
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