Question

QUESTION 11 Legal Advisory Inc., employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirec information for 2014: Indirect costs Annual salary of each attorney Annual salary of each paraprofessional Total professional labor-hours Budget $300,000 $100,000 $30,000 60,000 dlh Actual $304,000 $110,000 $31,000 70,000 dlh When using a normal costing system, year-end accounting records will show that indirect costs overallocated underallocated perfectly allocated within budget QUESTION 12 ing uses a ormal cost system and had the following data available for 20

Answer 1

Ans - Overallocated (Option 1st)

Allocated indirect cost = [(Budgeted indirect costs / Budgeted professional labor hours) X Actual professional labor hours]
=> [($300000 / 60000 dlh) X 70000 dlh]
=> $350000
Actual indirect cost = $304000

Hence it is seen that indirect costs are overallocated as indirect cost allocated are $350000 whereas Actual is only $304000.

(The first part of question is hidden but since there are only professional direct labor hours, therefore it is assumed that costs are allocated based on dlh.If there are any questions, kindly let me know in comments. If the solution is to your satisfaction, a thumbs up would be appreciated. Thank you)