Gant Accounting performs two types of services, Audit and Tax.
Gant’s overhead costs consist of computer support, $312000; and
legal support, $156000. Information on the two services
is:
Audit | Tax | |
Direct labor cost | $50000 | $100000 |
CPU minutes | 40000 | 10000 |
Legal hours used | 200 | 800 |
Overhead applied to audit services using activity-based costing
is
$187200.
$156000.
$312000.
$280800.
Ans.
There are two overheads namely computer support and legal support. Computer support will be allocated between audit amd tax in ratio of CPU minutes and legal support will be allocated in ratio of legal hours.
Calculation of overhead applied to audit services
Computer support= 312000*40000/50000
= 249600
Legal support=156000*200/1000
=31200
Total overhead= 249600+31200
= $280800
Gant Accounting performs two types of services, Audit and Tax. Gant’s overhead costs consist of computer...
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