Concept explainers
JLR Enterprises provides consulting services throughout California and uses a
JLR’s director of cost management, Brent Dean, anticipates the following costs for the upcoming year:
The firm’s partners desire to make a $640,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure.
On March 10, JLR completed work on a project for Martin Manufacturing. The following costs were incurred: professional staff salaries, $41,000; administrative support staff, $2,600; travel, $4,500; photocopying, $500; and other operating costs, $1,400.
Required:
- 1. Determine JLR’s total traceable costs for the upcoming year and the firm’s total anticipated overhead.
- 2. Calculate the predetermined overhead rate. The rate is based on total costs traceable to client jobs.
- 3. What percentage of cost will JLR add to each job to achieve its profit target?
- 4. Determine the total cost of the Martin Manufacturing project. How much would Martin be billed for services performed?
- 5. Notice that only 50 percent of JLR’s other operating cost is directly traceable to specific client projects. Cite several costs that would be included in this category and difficult to trace to clients.
- 6. Notice that 80 percent of the professional staff cost is directly traceable to specific client projects. Cite several reasons that would explain why this figure isn’t 100 percent.
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Managerial Accounting: Creating Value in a Dynamic Business Environment
- ! Required information [The following information applies to the questions displayed below.] JLR Enterprises provides consulting services throughout California and uses a job-order costing system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by JLR, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup. JLR's director of cost management, Victor Anthony, anticipates the following costs for the upcoming year: Percentage of Cost Directly Traceable to Clients 80% 60% 90% 90% 50% Type Professional staff salaries Administrative support staff Travel Photocopying Other operating costs Total Cost $ 2,500,000 300,000 250,000 50,000 100,000 $ 3,200,000 The firm's partners desire to make a $640,000 profit for the firm and plan to add a percentage markup on total cost to…arrow_forwardTech Solutions is a consulting firm that uses a job - order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor - hours. At the beginning of the year, it estimated that 55,000 direct labor - hours would be required for the period's estimated level of client service. The company also estimated $302, 500 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor - hour. The firm's actual overhead cost for the year was $321, 300 and its actual total direct labor was 58, 850 hours. Required: 1. Compute the predetermined…arrow_forwardech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 67,500 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $540,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $557,400 and its actual total direct labor was 75,000 hours. 1. Compute the predetermined overhead rate. 2.…arrow_forward
- Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 75,000 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $712,500 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm's actual overhead cost for the year was $731,500 and its actual total direct labor was 80,650 hours. Required: 1. Compute the predetermined overhead…arrow_forwardTech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 77,500 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $775,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $789,800 and its actual total direct labor was 83,350 hours. Required: 1. Compute the predetermined…arrow_forwardTech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 92,500 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $1,156,250 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm's actual overhead cost for the year was $1,177,550 and its actual total direct labor was 97,750 hours. Required: 1. Compute the predetermined…arrow_forward
- Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and Installs on behalf of its clients. The firm's direct labor Includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and Insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 92,500 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $1,156,250 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm's actual overhead cost for the year was $1,177,550 and its actual total direct labor was 97,750 hours. Required: 1. Compute the predetermined…arrow_forwardTech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 80,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $680,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $692,000 and its actual total direct labor was 83,000 hours. Required: 1. Compute the predetermined…arrow_forwardTech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 87,500 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $1,006,250 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $1,025,150 and its actual total direct labor was 92,400 hours. Required: 1. Compute the predetermined…arrow_forward
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- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College