Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of$224,000. An internally prepared report summarizes the Payroll Department's annual operating costs as follows:SuppliesPayroll clerks' salariesPayroll supervisor's salaryPayroll employee training expensesDepreciation of equipmentAllocated share of common building operating costsAllocated share of common administrative overheadTotal annual operating cost$ 34,000124,00062,00014,00024,00019,00032,000$309,000EDC currently rents overflow office space for $40,000 per year. If the company closes its Payroll Department, the employees occupying therented 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'sHuman Resource Management Department. As a result of this transfer, the company would discontinue its efforts to hire a new HumanResource Manager that it expected to pay an annual salary of $60,000.The Payroll Department's equipment would be transferred to other departments within the company to replace outdated equipment thatwould be recycled for zero salvage value.Required:What is the financial advantage (disadvantage) of outsourcing the Payroll Department?

Buy cost is the cost of purchasing the product from outside.Make cost is the cost of making/…

Answered: Required: What is the financial…

Business

Accounting

Required: What is the financial advantage (disadvantage) of outsourcing the Payroll Department?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 30E: A company uses charging rates to allocate service department costs to the using departments. The...

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Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $222,000. An internally prepared report summarizes the Payroll Department's annual operating costs as follows: Supplies Payroll clerks' salaries Payroll supervisor's salary Payroll employee training expenses Depreciation of equipment Allocated share of common building operating costs Allocated share of common administrative overhead Total annual operating cost $ 32,000 122,000 60,000 12,000 22,000 17,000 30,000 $ 295,000 EDC currently rents overflow office space for $38,000 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 Resource Management…
Brownley Company has one service department and two operating (production) departments. Payroll Department costs are allocated To the two operating departments in proportion to the number of employees in each. Listed below are the operating data for the current period: Direct Expenses $ 28,000 81,000 110,800 The total cost of operating the Milling Department for the current period is: Department Payroll Milling Assembly No. of Employees 45 105
Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $224,000. An internally prepared report summarizes the Payroll Department's annual operating costs as follows: Supplies Payroll clerks' salaries Payroll supervisor's salary Payroll employee training expenses Depreciation of equipment Allocated share of common building operating costs Allocated share of common administrative overhead Total annual operating cost $ 34,000 124,000 62,000 14,000 24,000 19,000 32,000 $ 309,000 EDC currently rents overflow office space for $40,000 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 Resource Management…
Hughes Payroll and Clerical Services (HPCS) provides payroll, bookkeeping, and other services to small businesses. HPCS financial records show the following costs for last quarter (QTR 1): Supplies Employee costs Total administration $ 14,000 1,015,000 455,000 HPCS recorded 4,375 billable hours in QTR 1 and fixed administrative cost was $245,000. Assuming no change in billable hours in the next quarter (QTR 2), supplies costs are expected to increase by 5 percent. Direct labor costs are expected to increase by 12 percent. Variable administration per billable hour is expected to remain the same, but fixed administration cost is expected to decrease by 7 percent. Required: a. HPCS expects to bill 5,425 hours next quarter. What are the estimated direct materials, direct labor, variable overhead, and fixed overhead costs for next quarter (QTR 2)? b. Determine the total costs per billable hour for QTR 1 and QTR 2. Complete this question by entering your answers in the tabs below. Required A…
Fast Feet Inc. makes running shoes and they are anticipating the incurrence of the following manufacturing overhead costs during the upcoming year: Indirect materials Cost $13,000 Indirect Labor Utilities Insurance Taxes $78,000 $44,000 $12,500 $12,400 $21,000 Depreciation on equipment What will Fast Feet Inc. budget for cash disbursements related to manufacturing overhead? OA. $122,100 OB. $159,900 OC. $91,000 OD. $180,900
Rundle Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows. Expected Direct labor Home 1: $63,000 Home 2: $108,000, Home 3: $181,000 Direct materials Home 1: 98,000 Home 2: 143,000 Home 3: 186,000 Assume Rundle needs to allocate two major overhead costs ($ 52,800 of employee fringe benefits and $12,,810 of indirect materials cost) among the three Jobs. required; Choose an appropriate cost driver for each of the overhead costs and determine the cost of each house ( round " allocation rate to 2 decimal places.)
Custom Engines Company has the following estimated costs for the upcoming year: Direct labor costs $62,800 Direct materials used $25,600 Salary of factory supervisor $37,800 Sales commissions $8300 Heating and lighting costs for factory $22,900 Depreciation on factory equipment $5500 Advertising expense $33,100 The company estimates that 2000 direct labor hours will be worked in the upcoming year, while 2800 machine hours will be used during the year. The predetermined manufacturing overhead rate per direct labor hour is closest to
Coronado Consulting provides weekly payroll processing for a number of small businesses. Gia Coronado, the company's owner, has been using an activity-based costing system for several years. She used the following information in preparing this year's budget. Activity Cost Pool Total Cost Cost Driver Expected Driver Volume Setting up new employees $ 91,250 Number of new employees 500 Processing weekly payroll $ 950,000 Number of paychecks printed 2,500,000 Weekly reporting $ 374,000 Number of clients 200 Annual tax reporting $ 280,000 Number of W-2s printed 80,000 (a) Your answer is correct. Calculate the cost rates for each activity cost pool. (Round answers to 2 decimal places, e.g. 15.25.) Cost Pool Activity Rate 182.5 /new employee Setting up new employees $ .38 /check Processing weekly payroll 1870 /client Weekly reporting $ 3.5 | /W-2 Annual tax reporting %24 %24 %24 %24
Simplex Company has the following estimated costs for next year: Direct materials $15,000 Direct labor $55,000 Sales commissions $75,000 Salary of production supervisor $35,000 Indirect materials $5,000 Advertising expense $11,000 Rent of factory equipment $16,000 Simplex estimates that 10,000 direct labor and 16,000 machine-hours will be worked during the year. If overhead in applied on the basis of machine hours, the overhead rate per hour will be:
Crane Limited is a company that produces machinery to customer orders, using a normal job-order cost system. It applies manufacturing overhead to production using a predetermined rate. This overhead rate is set at the beginning of each fiscal year by forecasting the year's overhead and relating it to direct labour costs. The budget for 2022 was as follows: Direct labour Manufacturing overhead $1,810,000 As at the end of the year, two jobs were incomplete. These were 1768B, with total direct labour charges of $111,000, and 1819C, with total direct labour charges of $390,800. Machine hours were 287 hours for 1768B and 647 hours for 1819C. Direct materials issued for 1768B amounted to $229,000, and for 1819C they amounted to $420,200. 905,000 Total charges to the Manufacturing Overhead Control account for the year were $902,500, and direct labour charges made to all jobs amounted to $1,582,600, representing 247,800 direct labour hours. There were no beginning inventories. In addition to…
Assume a company incurs $186,000 of customer service salaries. The employees in the Customer Service Department spend their time performing four activities as follows: 40% of their time is spent in "Problem Resolution," 25% of their time is spent in "New Account Setup," 20% of their time is spent in "Payment Processing," and 15% is spent in "Other" activities. In the company's activity-based costing system, how much of the customer service salaries would be allocated to the "New Account Setup" activity? Multiple Choice O $74,400 $37,200 $120,900 $46,500
XYZ Inc. Presented the following data for the first quarter of 2021: Prime Costs P560,000 Factory manager's salary 96,000 Variable factory overhead 80,000 Office salaries 84,000 Straight line depreciation of plant assets 60,000 Sales salaries 72,000 Other fixed factory overhead 40,000 Sales commission 60,000 2. For internal reporting purposes, the amount of period costs must be: