Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 3, Problem 41E
Refer to the illustration of
Required:
- 1. Compute the total budgeted staff compensation: both partner and associate staff compensation.
- 2. Compute Small World’s overhead rate on the basis of this single cost driver.
- 3. Recalculate the applied overhead for the Eye Style Global engagement.
- 4. Compare the applied overhead using the single cost driver with the applied overhead computed using the two cost drivers used in the text illustration.
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Refer to the illustration of overhead application in the Small World Advertising example. Suppose the firm used a single cost driver, total staff compensation, to apply overhead costs to each advertising engagement.Required:1. Compute the total budgeted staff compensation: both partner and associate staff compensation.2. Compute Small World’s overhead rate on the basis of this single cost driver.3. Recalculate the applied overhead for the EyeStyle Global engagement.4. Compare the applied overhead using the single cost driver with the applied overhead computed using the two cost drivers used in the text illustration.
Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities:
Service Departments
Production Departments
Information Systems
Facilities
Computer Programming
Information Systems Consulting
Software Training
Total
Budgeted overhead (base)
$ 368,000
$ 184,000
$ 736,000
$ 874,000
$ 575,000
$ 2,737,000
Information Systems (computer hours)
600
1,200
300
900
3,000
Facilities (square feet)
240
960
600
600…
Eisenhower Services, Inc., a management consulting firm, has been using a single predetermined overhead allocation rate with direct labor hours as the allocation
pase to allocate overhead costs. The president of Eisenhower decided to develop an ABC system to more accurately allocate the indirect costs. She identified two
activities related to the total indirect costs-travel and information technology (IT) support. The other relevant details are given below:
Estimated quantity of allocation
base
Activity
Allocation base
Estimated costs
1,800 miles
7,400 DLH.
Travel
$10,000
72,000
$82,000
Miles driven
IT Support
Direct labor hours
Total
During the current month, Eisenhower's consultants spent 240 labor hours for Miller, Inc. The job required the professionals to travel 360 miles in total. Direct Labor i
billed at $55 per hour. Determine the total cost of the consulting job using the ABC system. (Round any intermediate calculations to the nearest cent and your final
answer to thé nearest…
Chapter 3 Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
Ch. 3 - List and explain four purposes of product costing.Ch. 3 - Explain the difference between job-order and...Ch. 3 - How is the concept of product costing applied in...Ch. 3 - What are the purposes of the following documents:...Ch. 3 - Why is manufacturing overhead applied to products...Ch. 3 - Explain the benefits of using a predetermined...Ch. 3 - Describe one advantage and one disadvantage of...Ch. 3 - Describe an important cost-benefit issue involving...Ch. 3 - Explain the difference between actual and normal...Ch. 3 - When a single, volume-based cost driver (or...
Ch. 3 - Prob. 11RQCh. 3 - Describe the process of two-stage cost allocation...Ch. 3 - Define each of the following terms, and explain...Ch. 3 - Describe how job-order costing concepts are used...Ch. 3 - What is meant by the term cost driver? What is a...Ch. 3 - Describe the flow of costs through a...Ch. 3 - Give an example of how a hospital, such as the...Ch. 3 - Why are some manufacturing firms switching from...Ch. 3 - What is the cause of over applied or under applied...Ch. 3 - Briefly describe two ways of closing out over...Ch. 3 - Describe how a large retailer such as Lowes would...Ch. 3 - Prob. 22RQCh. 3 - For each of the following companies, indicate...Ch. 3 - The controller for Tender Bird Poultry, Inc....Ch. 3 - Finley Educational Products started and finished...Ch. 3 - Bodin Company manufactures finger splints for kids...Ch. 3 - McAllister, Inc. employs a normal costing system....Ch. 3 - Garrett Toy Company incurred the following costs...Ch. 3 - Crunchem Cereal Company incurred the following...Ch. 3 - Prob. 31ECh. 3 - Selected data concerning the past years operations...Ch. 3 - Sweet Tooth Confectionary incurred 157,000 of...Ch. 3 - The following information pertains to Trenton...Ch. 3 - The following data pertain to the Oneida...Ch. 3 - Refer to the data for the preceding exercise for...Ch. 3 - Design Arts Associates is an interior decorating...Ch. 3 - Suppose you are the controller for a company that...Ch. 3 - Laramie Leatherworks, which manufactures saddles...Ch. 3 - Refer to Exhibit 312, which portrays the three...Ch. 3 - Refer to the illustration of overhead application...Ch. 3 - The following data refer to Twisto Pretzel Company...Ch. 3 - Burlington Clock Works manufactures fine,...Ch. 3 - Perfecto Pizza Company produces microwavable...Ch. 3 - Stellar Sound, Inc. which uses a job-order costing...Ch. 3 - Finlon Upholstery, Inc. uses a job-order costing...Ch. 3 - JLR Enterprises provides consulting services...Ch. 3 - Garcia, Inc. uses a job-order costing system for...Ch. 3 - MarineCo, Inc. manufactures outboard motors and an...Ch. 3 - The following data refers to Huron Corporation for...Ch. 3 - Refer to the schedule of cost of goods...Ch. 3 - Marco Polo Map Companys cost of goods sold for...Ch. 3 - Midnight Sun Apparel Company uses normal costing,...Ch. 3 - Marc Jackson has recently been hired as a cost...Ch. 3 - Troy Electronics Company calculates its...Ch. 3 - Tiana Shar, the controller for Bondi Furniture...Ch. 3 - Scholastic Brass Corporation manufactures brass...Ch. 3 - Refer to the preceding problem regarding...Ch. 3 - Prob. 59PCh. 3 - TeleTech Corporation manufactures two different...Ch. 3 - CompuFurn, Inc. manufactures furniture for...Ch. 3 - FiberCom, Inc., a manufacturer of fiber optic...
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