Lewis and Stark is a public accounting firm that offers two primary services, auditing and tax-return preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignment of overhead. The tax partners argue for assigning overhead on the basis of 40% of direct labor dollars, while the audit partners argue for implementing activity-based costing. The partners agree to use next year's budgeted data for purposes of analysis and comparison. The following overhead data are collected to develop the comparison. Activity Cost Pools Employee training Typing and secretarial Computing Facility rental Travel (a) Cost Drivers Direct labor dollars Number of reports/forms Number of minutes Number of employees Per expense reports Total overhead cost assigned $ Estimated Overhead Audit $195,525 76,200 216,000 142,000 81,275 $711,000 Estimated Use of Cost Drivers $1,777,500 2,500 60,000 40 Trace directly Tax Use of Cost Drivers per Service Audit $1,150,000 800 27,000 22 56,000 Tax $627,500 1,700 Using traditional product costing as proposed by the tax partners, compute the total overhead cost assigned to both services (audit and tax) of Lewis and Stark. 33,000 18 25,275

Chirko ​& Partners, a​ Quebec-based public accounting​ partnership, specializes in audit services. Its​ job-costing system has a single​ direct-cost category​ (professional labor) and a single​ indirect-cost pool​ (audit support, which contains all costs of the Audit Support​ Department). Audit support costs are allocated to individual jobs using actual professional​ labor-hours. Chirko & Partners employs 10 professionals to perform audit services. Budgeted and actual amounts for 2017 are as​ follows: Budget for 2017     Professional labor compensation $975,000   Audit support department costs $675,000   Professional labor-hours billed to clients 15,000 hours   Actual results for 2017     Audit support department costs $775,000   Professional labor-hours billed to clients 15,500 hours   Actual professional labor cost rate $54 per hour   1. Compute the​ direct-cost rate and the​ indirect-cost rate per professional​ labor-hour for 2017…

Select Manufacturing Co. produces three joint products and one organic waste byproduct. Assuming the byproduct can be sold to an outside party, what is the correct accounting treatment of the byproduct proceeds received by the firm? a. Apply sale proceeds on a prorated basis to the joint products’ sales. b. Use the sale proceeds to reduce the common costs in the joint production process. c. Apply the sale proceeds to the firm’s miscellaneous income account. d. Either “b” or “c” can be used

Garrison Co. produces three products - X, Y, and Z - from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. Sales Value at If Processed Further Units Produced Product Split Off Sales Value Additional Costs 40,00 80,00 X 6,000 $ $ $1,200 0 0 15,00 40,00 y 3,000 3,000 0 0 16,00 30,00 Z 1,000 1,500 0 0 The amount of joint costs allocated to product Z using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

The Josh - Lester Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full authority on all decisions involving the sale of that division's output both to outsiders and to other divisions of Josh - Lester. i(Click the icon to view the information on the divisions.) Begin by calculating the contribution margin from selling units to other customers. Then calculate the net benefit (cost) to the company as a whole. (Enter a net cost using parentheses or a minus sign.) Less: The company already completed an analysis to determine if it was in its best interest to have division C purchase 1,300 units from an external supplier for $125 per unit, assuming that there are no alternative uses for internal facilities of division A. (Click the icon to view the results of the analysis.) Now, assume that division A can sell…

Munabhai

Bradbo owned two adjoining restaurants, the Pork Palace and the Chicken Hut. Each restaurant was treated as a profit center for performance evaluation purposes. Although the restaurants had separate kitchens, they shared a central baking facility. The principal costs of the baking area included materials, supplies, labor, and depreciation and maintenance on the equipment.   Bradbo allocated the monthly costs of the baking facility to the two restaurants based on the number of tables served in each restaurant during the month using dual allocation and equal sharing of fixed costs. In April, the costs were $39,000, of which $20,500 were fixed. The Pork Palace served 3,830 tables, while the Chicken Hut served 5,745 tables.   1. The amount of the joint cost that should have been allocated to the Chicken Hut in April is calculated to be 2. The amount of joint cost that should have been allocated to the Pork Palace in April is calculated to be

Wonkies, Inc. is a large company that owns fast-food restaurants, has a soft drink division, and a snack division. Wonkies, Inc. corporate management gives its division managers considerable operating and investment autonomy in running their divisions. Wonkies, Inc. is considering how it should compensate Mark Hamm, the general manager of the snack division. ■ Proposal 1 calls for paying Hamm a fixed salary. ■ Proposal 2 calls for paying Hamm no salary and compensating him only on the basis of the division’s RI, calculated based on operating income before any bonus payments. ■ Proposal 3 calls for paying Hamm some salary and some bonus based on RI. Q. Wonkies, Inc. competes against Galaxy Industries in the snack business. Galaxy is approximately the same size as the Wonkies snack division and operates in a business environment that is similar to Wonkies. The top management of Wonkies, Inc. is considering evaluating Hamm on the basis of his snack division’s RI minus Galaxy’s RI. Hamm…

Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $223,200. An internally prepared report summarizes the Payroll Department’s annual operating costs as follows: Supplies $ 33,200 Payroll clerks’ salaries 123,200 Payroll supervisor’s salary 61,200 Payroll employee training expenses 13,200 Depreciation of equipment 23,200 Allocated share of common building operating costs 18,200 Allocated share of common administrative overhead 31,200 Total annual operating cost $ 303,400 EDC currently rents overflow office space for $39,200 per year. If the company closes its Payroll Department, the employees occupying the rented office space could be brought in-house and the lease agreement on the rented space could be terminated with no penalty. If the Payroll Department is outsourced the payroll clerks will not be retained; however, the supervisor would be transferred to the company’s Human…

Grael Technology has two divisions, Consumer and Commercial, and two corporate service departments, Tech Support and Purchasing. The corporate costs for the year ended December 31, 20Y7, are as follows: Tech Support Department $336,000 Purchasing Department 67,500 Other corporate administrative costs 448,000 Total corporate costs $851,500   The other corporate administrative costs include officers’ salaries and miscellaneous smaller costs required by the corporation. The Tech Support Department allocates the divisions for services rendered, based on the number of computers in the department, and the Purchasing Department allocates divisions for services, based on the number of purchase orders for each department. The usage of service by the two divisions is as follows:   Tech Support Purchasing Consumer Division 300 computers 1,800 purchase orders Commercial Division 180   2,700       Total 480 computers 4,500 purchase orders   The service department allocations…