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.

Practice Example 1: White Company has two departments, Cutting and Finishing. The company uses a job-order cost system and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate on direct labor cost. At the beginning of the year, the company made the following estimates: Department Direct labor-hours Machine-hours Manufacturing overhead cost Direct labour cost Cutting 6,000 48,000 Rs360,000 Rs50,000 Finishing 30,000 5,000 Rs486,000 Rs270,000 Required: 1. Compute the predetermined overhead rate to be used in each department. 2. Assume that the overhead rates that you computed in (1) above are in effect. The job cost sheet for job 203, which was started and completed during the year, showed the following: Cutting 6 80 Rs500 Rs70 Department Finishing 20 4 Rs310 Rs150 Direct labor-hours Machine-hours Materials requisitioned Direct labor cost Compute the total overhead cost applied to Job…

Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:       Quarter    First   Second   Third   Fourth Direct materials $ 320,000   $ 160,000   $ 80,000   $ 240,000 Direct labor   80,000     40,000     20,000     60,000 Manufacturing overhead   230,000     206,000     194,000     ? Total manufacturing costs (a) $ 630,000   $ 406,000   $ 294,000   $ ? Number of units to be produced (b)   80,000     40,000     20,000     60,000 Estimated unit product cost (a) ÷ (b) $ 7.88   $ 10.15   $ 14.70   $ ?     Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with…

1 AirQual Test Corporation provides on-site air quality testing services. The company has provided the following cost formulas and actual results for the month of February: Fixed Component per Month Variable Component Revenue ts per Job $ 360 Actual Total for February $ 18,950 Technician wages $ 6,400 $ 6,450 Mobile lab operating expenses $ 2,900 $ 35 $ 4,530 Office expenses $ 2,600 $ 2 $ 3,050 Advertising expenses Insurance $ 970 $ 1,680 $ 995 $ 1,680 eBook Miscellaneous expenses $ 500 $ 3 $ 465 Ask eferences The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses should be $2,900 plus $35 per job, and the actual mobile lab operating expenses for February were $4,530. The company expected to work 50 jobs in February, but actually worked 52 jobs. Required: Prepare a flexible budget performance report showing AirQual Test Corporation's revenue and spending variances and activity variances for February. (Indicate the effect of each…

Red Industries produces computers and goes through two operations, Assembling and Packaging before it is ready to be sold to customers. Next year's expected costs and activities are shown below. Data for Dept. Overhead costs Assembling Direct labor 401,000 DLH 99,000 hours Machine hours Packaging $ 586,600 72,000 MH 80,000 MH DLH $ 413,400 1. Compute Red's departmental overhead rate for the Assembling department based on direct labor hours. 2. Compute Red's departmental overhead rate for the Packaging department based on machine hours. 3, Compute a single plantwide rate based on machine hours. Show your work with an Excel spreadsheet or in a Word file.

Direct Labor Standards for a Service Company One of the operations in the United States Postal Service is a mechanical mail sorting operation. In this operation, letter mail is sorted at a rate of 1.5 letters per second. The letter is mechanically sorted from a three-digit code input by an operator sitting at a keyboard. The manager of the mechanical sorting operation wants to determine the number of temporary employees to hire for December. The manager estimates that there will be an additional 24,192,000 pieces of mail in December, due to the upcoming holiday season. Assume that the sorting operators are temporary employees. The union contract requires that temporary employees be hired for one month at a time. Each temporary employee is hired to work 160 hours in the month. a. How many temporary employees should the manager hire for December? employees b. If each temporary employee earns a standard $16.40 per hour, what would be the labor time variance if the actual number of…

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Exercise 2-9 (Algo) Job-Order Costing and Decision Making [LO2-1, LO2-2, LO2-3] Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production Fixed manufacturing overhead cost Variable manufacturing overhead cost per machine-hour Required: 1. Compute the plantwide predetermined overhead rate. 2. During the year, Job P90 was started, completed, and sold to the customer for $4,000. The following information was available with respect to this job: Direct materials $ 1,840 Direct labor cost Machine-hours used $ 1,320 87 Compute the total manufacturing cost assigned to Job P90. Complete this question by entering your answers in the tabs below. Required 1 Required 2 240,000 $ 4,320,000 $ 2.00 Compute the plantwide predetermined overhead…

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