Week 9 P9-1 P9-2 P9-3 P9-4 P9-6 Principles of Cost Accounting

Week 9 P9-1, P9-2, P9-3, P9-4, P9-6 Principles of Cost Accounting  - EXCEL TEMPLATE 

P9-1 Libby and Sandman, Attorneys-at-Law, provided legal representation to Williams Equipment, Inc., in a product liability suit. Twenty partner hours and 65 associate hours were worked in defending the company. The cost of each partner hour is $325, which includes partner wages plus overheard based on direct labor cost. The cost of each associate hour is $145, which also includes both wages and overhead. Other costs that can be directly identified with the job are travel ($2,800) and telephone/fax charges ($1,740). The date Williams contracted with Libby and Sandman was May 8, and the defense was successfully completed on December 21.

Required:

Prepare a job order cost sheet, in good form, for Williams Equipment, Inc.

 

P9-2 The budget for the Murphy Equipment Inc. job in P9-1 consisted of the following amounts:

Partners’ salary and overhead                         $6,300

Associates’ salary and overhead                       9,175

Travel                                                                4,150

Telephone/fax                                                  1,475

The successful bid price of the job was $26,900.

Required:  

Prepare a cost performance report
Compute the budgeted profit and the actual profit on the job.

P9-3 Lynn and Paul, partners in a systems consulting firm, budgeted the following professional labor hours for the year ended December 31, 2008:

Partners………………4,000
Associates……………14,000
Staff………………….22,000

Partners have a billing rate of $225 per hour and actually earn $110 per hour. Associates bill out at $140 per hour and earn $85 per hour. Staff has a billing rate of $95 per hour and earns $55 per hour.

Required:

Prepare a revenue budget
Prepare a professional labor budget

 

P9-4 Lynn and Paul, the systems consultants in P9-3, budgeted overhead and other expenses as follows for the year ended December 31, 2008:

Overhead

            Depreciation-equipment…………….$60,000

            Depreciation-building……………….135,000

            Fringe benefits……………………….385,000

            Photocopying…………………………95,000

Secretarial support……………………465,000

Telephone/fax…………………………115,000

Utilities………………………………..193,000

 

Other expenses:

Travel…………………………………..$123,000
Meals…………………………………..37,000

Required:
Prepare an overhead budget
Prepare an other expenses budget
Prepare a budgeted income statement

P9-6 Devine and O’Clock, architects, have been using a simplified costing system in which all professional labor costs are included in a single direct cost category (professional labor) and all overhead costs are included in a single indirect cost pool (professional support) and allocated to jobs using professional labor hours as the allocation base. Consider two clients: Shank Products, which required 50 hours of design work for a new addition; and Sayers Markets, which required plans for a new store that took 20 hours to draw. The firm has two partners who each earn a salary of $150,000 a year and four associates who each earn $60,000 per year. Each professional has 1,500 billable hours per year. The professional support is $590,000, which consists of $350,000 of design support and $240,000 of staff support. Shank’s job required 30 hours of partner time and 20 hours of associate time. Sayers job required 5 hours of partner time and 15 hours of associate time.

Required:

Prepare job cost sheets for Shank Products and Sayers Markets, using a simplified costing system with one direct and one indirect cost pool.

Prepare job cost sheets for the two clients; using an activity based costing system with two direct cost categories (partner labor and associate labor) and two indirect cost categories (design support and associate labor). Use professional labor dollars as the cost allocation base for design support and use professional labor hours for staff support. 

TUTORIAL PREVIEW

1.

Cost Performance Report
	Actual Result	Budget	Variance
Partners' salary and overhead	$          6,500	$          6,300	$            (200)	U
Associates' salary and overhead	9,425	9,175	(250)	U

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