1. Computation of Job cost and billed amount for Smith Job and Jones Job Jobs using company's traditional costing system:- | |||||||
Computation of overhead rate :- | |||||||
Estimated Total Overheads | 2500000+1000000 | = | $ 3,500,000 | ||||
Total professional labor hours | (2000*5)+(2000*20) | = | 50000 | ||||
Overhead rate | = | Estimated Total Overheads | |||||
Total professional labor hours | |||||||
= | $3,500,000 | ||||||
50000 | |||||||
= | $70.00 | per professional labor hour | |||||
(a) Computation of Cost :- | |||||||
Job | Activity Driver | Plantwide OH Rate | Overhead Cost | ||||
a | b | c | d = b×c | ||||
Smith Job | 70 | Professional hours | $70.00 | per professional labor hour | $4,900 | ||
Jones Job | 70 | Professional hours | $70.00 | per professional labor hour | $4,900 | ||
(b) Computation of Amount that should be billed to customer :- | |||||||
Job | |||||||
Smith Job | Jones Job | ||||||
Cost | $ 4,900 | $ 4,900 | |||||
Add: Markup @25% | $ 1,225 | $ 1,225 | |||||
Billed amount | $ 6,125 | $ 6,125 | |||||
2. Computation of Job cost and billed amount for Smith Job and Jones Job Jobs using activity based costing system:- | |||||||
Computation of Cost per driver :- | |||||||
Activity cost pool | Activity measures (Cost Drivers) | Estimated Overhead Cost | Expected Activity | Cost per driver | |||
No. of attorneys | Annual billable hours per attorney | Total | |||||
a | b | c | d | e | f = d*e | g = c/f | |
Legal Support | Associate labor hours | $ 2,500,000 | 20 | 2,000 | 40,000 | $ 62.50 | |
Secretarial Support | Partner labor hours | $ 1,000,000 | 5 | 2,000 | 10,000 | $ 100 | |
Total Overhead Cost | $ 3,500,000 | ||||||
(a) Computation of Cost :- | |||||||
Overhead Assigned | Activity Driver | Cost per driver | Total Overhead Cost | ||||
a | b | c | d = b×c | ||||
Smith Job | |||||||
Legal Support | 20 | Associate labor hours | $ 62.50 | $ 1,250 | |||
Secretarial Support | 50 | Partner labor hours | $ 100.00 | $ 5,000 | |||
Total Cost | $ 6,250 | ||||||
Jones Job | |||||||
Legal Support | 55 | Associate labor hours | $ 62.50 | $ 3,438 | |||
Secretarial Support | 15 | Partner labor hours | $ 100 | $ 1,500 | |||
Total Cost | $ 4,938 | ||||||
(b) Computation of Amount that should be billed to customer :- | |||||||
Secretarial Support | |||||||
Jones Job | Legal Support | ||||||
Cost | $ 6,250 | $ 4,938 | |||||
Add: Markup @25% | $ 1,563 | $ 1,234 | |||||
Billed amount | $ 7,813 | $ 6,172 |
Feel free to ask any clarification, if required. Please provide feedback by thumbs up, if satisfied. It will be highly appreciated. Thank you.
Problem 1 (25 points) You are a consultant that has been asked by a law firm...
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