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Tilley Professional Services is composed of two separate divisions: (1) tax services as provided by the tax department and (2) auditing services as provided by the audit department. Each department has numerous clients. Engagement with each individual client is a separate service (i.e., product) and each department has several engagements in each period. Cost items of the firm follow: Salary of the partner in charge of the audit department Salary of the managing partner of the firm Cost of office supplies such as paper, pencils, erasers, etc. Depreciation of computers used in the tax department License fees of the firm Professional labor for a tax engagement Office assistant labor supporting both departments Professional labor for an audit engagement Depreciation of computers used in the audit department Salary of the partner in charge of the tax department Travel expenditures for an audit engagement Page 194 Required a. Identify each cost as being a direct or indirect cost assuming the cost objects are the individual engagements (audit engagements or tax engagements). b. Identify each cost as being a direct or indirect cost assuming the cost objects are the two departments. c. Identify each cost as being a direct or indirect cost assuming the cost object is Tilley Professional Services as a whole.

Tilley Professional Services is composed of two separate divisions: (1) tax services as provided by the tax department and (2) auditing services as provided by the audit department. Each department has numerous clients. Engagement with each individual client is a separate service (i.e., product) and each department has several engagements in each period. Cost items of the firm follow: Salary of the partner in charge of the audit department Salary of the managing partner of the firm Cost of office supplies such as paper, pencils, erasers, etc. Depreciation of computers used in the tax department License fees of the firm Professional labor for a tax engagement Office assistant labor supporting both departments Professional labor for an audit engagement Depreciation of computers used in the audit department Salary of the partner in charge of the tax department Travel expenditures for an audit engagement Page 194 Required a. Identify each cost as being a direct or indirect cost assuming the cost objects are the individual engagements (audit engagements or tax engagements). b. Identify each cost as being a direct or indirect cost assuming the cost objects are the two departments. c. Identify each cost as being a direct or indirect cost assuming the cost object is Tilley Professional Services as a whole.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter10: Evaluating Decentralized Operations
Section: Chapter Questions
Problem 2PA: Profit center responsibility reporting for a service company Red Line Railroad Inc. has three...
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Exercise 4-1B Direct versus indirect costs Tilley Professional Services is composed of two separate divisions: (1) tax services as provided by the tax department and (2) auditing services as provided by the audit department. Each department has numerous clients. Engagement with each individual client is a separate service (i.e., product) and each department has several engagements in each period. Cost items of the firm follow: Salary of the partner in charge of the audit department Salary of the managing partner of the firm Cost of office supplies such as paper, pencils, erasers, etc. Depreciation of computers used in the tax department License fees of the firm Professional labor for a tax engagement Office assistant labor supporting both departments Professional labor for an audit engagement Depreciation of computers used in the audit department Salary of the partner in charge of the tax department Travel expenditures for an audit engagement Page 194 Required a. Identify each cost as being a direct or indirect cost assuming the cost objects are the individual engagements (audit engagements or tax engagements). b. Identify each cost as being a direct or indirect cost assuming the cost objects are the two departments. c. Identify each cost as being a direct or indirect cost assuming the cost object is Tilley Professional Services as a whole.
Transcribed Image Text:Exercise 4-1B Direct versus indirect costs Tilley Professional Services is composed of two separate divisions: (1) tax services as provided by the tax department and (2) auditing services as provided by the audit department. Each department has numerous clients. Engagement with each individual client is a separate service (i.e., product) and each department has several engagements in each period. Cost items of the firm follow: Salary of the partner in charge of the audit department Salary of the managing partner of the firm Cost of office supplies such as paper, pencils, erasers, etc. Depreciation of computers used in the tax department License fees of the firm Professional labor for a tax engagement Office assistant labor supporting both departments Professional labor for an audit engagement Depreciation of computers used in the audit department Salary of the partner in charge of the tax department Travel expenditures for an audit engagement Page 194 Required a. Identify each cost as being a direct or indirect cost assuming the cost objects are the individual engagements (audit engagements or tax engagements). b. Identify each cost as being a direct or indirect cost assuming the cost objects are the two departments. c. Identify each cost as being a direct or indirect cost assuming the cost object is Tilley Professional Services as a whole.
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