Horngren's Cost Accounting, Student Value Edition (16th Edition)
16th Edition
ISBN: 9780134476032
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Chapter 5, Problem 5.31P
Problems
5-31
Peyton also received a phone call from its only other client, Bluestone, Inc., which was very pleased with both the quality of the work and the price charged on its most recent job.
Wharton Associates operates at capacity and uses a cost-based approach to pricing (billing) each job. Currently it uses a simple costing system with a single direct-cost category (professional labor-hours) and a single indirect-cost pool (general support). Indirect costs are allocated to cases on the basis of professional labor-hours per case. The job files show the following:
| Steger Enterprises | Bluestone Inc. | |
| Professional labor | 3,000 hours | 2,000 hours |
Professional labor costs at Bradley Associates are $160 an hour. Indirect costs are allocated to cases at $100 an hour. Total indirect costs in the most recent period were $500,000.
- 1. Why is it important for Bradley Associates to understand the costs associated with individual jobs?
Required
- 2. Compute the costs of the Steger Enterprises and Bluestone Inc. jobs using Bradley’s simple costing system.
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Exercise 7-40 (Algo) Job Costing in a Service Organization (LO 7-4)
At the beginning of the month, Arthur's Olde Consulting Corporation had two jobs in process that had the following costs assigned from previous months.
Job Number
Direct Labor
Applied Overhead
SY-400
$
23,440
?
SY-403
15,520
?
During the month, Jobs SY-400 and SY-403 were completed but not billed to customers. The completion costs for SY-400 required $26,000 in direct labor. For SY-403, $76,000 in labor was used.
During the month, the only new job, SY-404, was started but not finished. Total direct labor costs for all jobs amounted to $149,520 for the month. Overhead in this company refers to the cost of work that is not directly traced to particular jobs, including copying, printing, and travel costs to meet with clients. Overhead is applied at a rate of 60 percent of direct labor costs for this and previous periods. Actual overhead for the month was $93,000.
Required:
a. What are the…
Exercise 7-42 (Algo) Job Costing in a Service Organization (LO 7-4)
Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 440 hours for Massive Airframes and 671 hours for Gigantic Drydocks. AB bills clients at the rate of $515 per hour; labor cost for its professional staff is $210 per hour. Overhead costs in March totaled $41,010. Overhead is applied to clients at $44 per labor-hour. In addition, AB had $199,700 in marketing and administrative costs. All transactions are on account. All services were billed.
Transaction
Description
(a)
Record Labor cost
(b)
Record Applied Service Overhead
(c)
Record Cost of services billed
(d)
Record Actual Service Overhead
Required:
a. Show labor and overhead cost flows through T-accounts.
b. Prepare an income statement for the company for March.
Exercise 7-34 Job Costing in a Service Organization (LO 7-4) Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 452 hours for Massive Airframes and 662 hours for Gigantic Drydocks. AB bills clients at the rate of $509 per hour; labor cost for its professional staff is $220 per hour. Overhead costs in March totaled $40,930. Overhead is applied to clients at $45 per labor-hour. In addition, AB had $199,500 in marketing and administrative costs. All transactions are on account. All services were billed.
Required: (a) Show labor and overhead cost flows through T-accounts.
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Chapter 5 Solutions
Horngren's Cost Accounting, Student Value Edition (16th Edition)
Ch. 5 - What is broad averaging, and what consequences can...Ch. 5 - Why should managers worry about product...Ch. 5 - What is costing system refinement? Describe three...Ch. 5 - What is an activity-based approach to designing a...Ch. 5 - Describe four levels of a cost hierarchy.Ch. 5 - Why is it important to classify costs into a cost...Ch. 5 - What are the key reasons for product cost...Ch. 5 - Prob. 5.8QCh. 5 - Department indirect-cost rates are never...Ch. 5 - Prob. 5.10Q
Ch. 5 - Prob. 5.11QCh. 5 - Prob. 5.12QCh. 5 - Activity-based costing is the wave of the present...Ch. 5 - Increasing the number of indirect-cost pools is...Ch. 5 - The controller of a retail company has just had a...Ch. 5 - Conroe Company is reviewing the data provided by...Ch. 5 - Prob. 5.17MCQCh. 5 - Cost hierarchy. Roberta, Inc., manufactures...Ch. 5 - ABC, cost hierarchy, service. (CMA, adapted)...Ch. 5 - Alternative allocation bases for a professional...Ch. 5 - Plant-wide, department, and ABC Indirect cost...Ch. 5 - Plant-wide, department, and activity-cost rates....Ch. 5 - ABC, process costing. Sander Company produces...Ch. 5 - Department costing, service company. DLN is an...Ch. 5 - Activity-based costing, service company....Ch. 5 - Activity-based costing, manufacturing. Decorative...Ch. 5 - ABC, retail product-line profitability. Fitzgerald...Ch. 5 - Prob. 5.28ECh. 5 - Activity-based costing. The job-costing system at...Ch. 5 - ABC, product costing at banks,...Ch. 5 - Problems 5-31 Job costing with single direct-cost...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - Job costing with multiple direct-cost categories,...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - First-stage allocation, time-driven activity-based...Ch. 5 - Department and activity-cost rates, service...Ch. 5 - Activity-based costing, merchandising. Pharmahelp,...Ch. 5 - Choosing cost drivers, activity-based costing,...Ch. 5 - ABC, health care. Crosstown Health Center runs two...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - Unused capacity, activity-based costing,...Ch. 5 - ABC, implementation, ethics. (CMA, adapted) Plum...Ch. 5 - Activity-based costing, activity-based management,...
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