Direct costing method

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Reference no: EM13849092

1. Joleen Harmon, CPA, has two clients and uses a job order cost system. Client A requires 20 hours of partner time and 100 hours of staff time. Client B will use 12 hours of partner time and 75 hours of staff time. Partners are paid $85 an hour and bill support time at 50% of their hourly rate. Staff are paid $25 an hour and bill support time at $20 per billable hour. What is the total charge to each of these clients if profit is added at 20% over cost?

2.Kelley and Wright, Attorneys, have the following budgeted items for the month of May: Fringe benefits $9,200 Depreciation-equipment 5,000 Utilities 2,000 Professional salaries (from budget) 20,000 Travel 2,400 Revenues (from budget) 68,000 Lease expense 6,700 Secretarial support 5,600 Professional dues and subscriptions 3,800 Prepare a budgeted income statement for the month of May.

3.Walters and Witt, a law firm, is analyzing the profitability of its cases. During the year, the firm represented the Umberg Company in numerous routine legal issues, for which it charged a monthly retainer fee of $2,500. Budget information for the firm follows: Professional labor: Partners $500,000 Associates 900,000 Paralegals 600,000 Total $2,000,000 Overhead: Secretarial salaries $900,000 Depreciation of office equipment 300,000 Fringe benefits 400,000 Lease expense 200,000 Utilities 300,000 Communication expenses 250,000 Office supplies 150,000 Total $2,500,000 Partner, associate, and paralegal hourly salary rates are $100, $60, and $20, respectively. Actual time spent for the Umberg cases follows: Actual Partners 23 hours Associates 42 hours Paralegals 72 hours Walters and Witt uses activity-based costing to determine the cost of its cases. With a consultant's help, the firm has developed the following information about cost pools: Cost Pool Expenses Included Cost Allocation Base Secretarial support Secretarial salaries Partner labor hours Fringe benefits Fringe benefits Professional labor dollars Office support Depreciation, lease, utilities, communications, and supplies Professional labor hours a. Compute the budgeted rate per unit of cost driver for each cost pool. b. Using activity-based costing, compute the cost of the Umberg work this year

4.Dye and Dye, Attorneys-at-Law, each bill 1,500 hours per year and receive pay of $100,000 each. Four paralegals work for the firm and each receives pay of $40,000 and works 2,000 hours per year. Overhead of $396,000 is anticipated; $300,000 is attorney support, and the rest is paralegal support. Determine overhead under each of the following circumstances: a. A simplified cost approach is used based on hours. b. A simplified cost approach is used based on payroll dollars. c. An activity-based costing approach is used. Attorney support is based on labor costs, and paralegal support is based on hours worked

5.The Tijama Manufacturing Company has determined the cost of manufacturing a unit of product to be as follows, based on normal production of 50,000 units per year: Direct materials $20.00 Direct labor 15.00 Variable factory overhead 10.00 $45.00 Fixed factory overhead 12.00 $57.00 Operating statistics for the month of August and September include August September Units produced 4,200 4,000 Units sold 3,500 4,200 Selling and administrative expenses $25,000 $35,000 The selling price is $70 per unit. There were no inventories on August 1, and there is no work in process at September 30. Prepare comparative income statements for each month under the following methods: a. Absorption costing method b. Direct costing method

6.The Tijama Manufacturing Company has determined the cost of manufacturing a unit of product to be as follows, based on normal production of 50,000 units per year: Direct materials $20.00 Direct labor 15.00 Variable factory overhead 10.00 $45.00 Fixed factory overhead 12.00 $57.00 Operating statistics for the month of August and September include August September Units produced 4,200 4,000 Units sold 3,500 4,200 Selling and administrative expenses $25,000 $35,000 The selling price is $70 per unit. There were no inventories on August 1, and there is no work in process at September 30. Prepare comparative income statements for each month under the following methods: a. Absorption costing method b. Direct costing method

7.TTMC has determined the cost of manufacturing a unit of product to be as follows, based on normal production of 50,000 units per year: Direct materials $20.00 Direct labor 15.00 Variable factory overhead 10.00 $45.00 Fixed factory overhead 12.00 $57.00 Operating statistics for the month of August and September include August September Units produced 4,200 4,000 Units sold 3,500 4,200 Selling and administrative expenses $25,000 $35,000 The selling price is $70 per unit. There were no inventories on August 1, and there is no work in process at September 30. Prepare comparative income statements for each month a. Absorption costing method b. Direct costing method

 

Reference no: EM13849092

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