(Solution) 13-52 Choice Of The Cost-Allocation Bases In Accounting Firm Brenda McCoy, The Managing Partner Of McCoy, Brennan, And Cable, A Public Accounting... | Snapessays.com


(Solution) 13-52 Choice of the Cost-Allocation Bases in Accounting Firm Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting...


13-52 Choice of the Cost-Allocation Bases in Accounting Firm

 

 

Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs to jobs than just direct labor.

 

In this way, the firm will be able to justify billings to clients.

 

 

Last year’s costs were as follow:

 

 

Direct-professional labor $ 5,000,000

 

Overhead 10,000,000

 

Total costs $15,000,000

 

 

The following costs were included in overhead:

 

 

Computer time $ 750,000

 

Secretarial cost 700,000

 

Photocopying 250,000

 

Fringe benefits to direct labor 800,000

 

Phone call time with clients (est-ed but not tabulated) 500,000

 

Total $3,000,000

 

 

The firm’s data processing techniques now make it feasible to document and trace these costs to individual jobs.

 

 

As an experiment, in December Brenda McCoy arranged to trace these costs to six audit engagements.

 

Two job records showed the following:

 

Engagement

 

Eagledale Company First Valley Bank

 

Direct-professional labor $15,000 $15,000

 

Fringe benefits to direct labor 3,000 3,000

 

Phone call time with clients 1,500 500

 

Computer time 3,000 700

 

Secretarial costs 2,000 1,500

 

Photocopying 500 300

 

Total direct costs $25,000 $21,000

 

 

Compute the overhead application rate based on last year’s costs.

 

Suppose last year’s costs were reclassified so that $3 million would be regarded as direct costs instead of overhead. Compute the overhead application rate as a percentage of direct labor and as a percentage of total direct costs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Qn:

 

1. Using the three rates computed in numbers 1 and 2, compute the total costs of engagements for Eagledale Company and First Valley Bank.13-52 Choice of the Cost-Allocation Bases in Accounting Firm

 

Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the

 

desirability of tracing more costs to jobs than just direct labor.

 

In this way, the firm will be able to justify billings to clients.

 

Last year’s costs were as follow:

 

Direct-professional labor

 

$ 5,000,000

 

Overhead

 

10,000,000

 

Total costs

 

$15,000,000

 

The following costs were included in overhead:

 

Computer time

 

$ 750,000

 

Secretarial cost

 

700,000

 

Photocopying

 

250,000

 

Fringe benefits to direct labor

 

800,000

 

Phone call time with clients (

 

est-ed but not tabulated

 

)

 

500,000

 

Total

 

$3,000,000

 

The firm’s data processing techniques now make it feasible to document and trace these costs to

 

individual jobs.

 

As an experiment, in December Brenda McCoy arranged to trace these costs to six audit engagements.

 

Two job records showed the following:

 

Engagement

 

Eagledale Company

 

First Valley Bank

 

Direct-professional labor

 

$15,000

 

$15,000

 

Fringe benefits to direct labor

 

3,000

 

3,000

 

Phone call time with clients

 

1,500

 

500

 

Computer time

 

3,000

 

700

 

Secretarial costs

 

2,000

 

1,500

 

Photocopying

 

500

 

300

 

Total direct costs

 

$25,000

 

$21,000

 

Compute the overhead application rate based on last year’s costs.

 

Suppose last year’s costs were reclassified so that $3 million would be regarded as direct costs instead

 

of overhead. Compute the overhead application rate as a percentage of direct labor and as a

 

percentage of total direct costs.

 

Last years cost

 

Direct labor

 

5,000,000.00

 

Overhead

 

10,000,000.00

 

15,000,000.00

 

Costs included in overhead

 

Computer time

 

750000

 

Secreterial cost

 

700000

 

Photocpoying

 

250000

 

Fringe benefits to direct

 

labor

 

800000

 

Phone call time with

 

clients

 

500000

 

3000000

 

1

 

Overhead application rate based on last years data

 

200%

 

2

 

Suppose the cost 3000,000 would be regarded as direct cost it will

 

Last year cost

 

Direct labor

 

5,000,000.00

 

Direct cost

 

3,000,000.00

 

Overhead

 

7,000,000.00

 

15,000,000.00

 

Overhead application rate

 

as a percentage of direct labor would be

 

140.0%

 

Overhead application rate

 

as a percentage of direct cost would be

 

87.5%

 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: May 23, 2022

Solution~00021147602315.zip (25.37 KB)


This attachment is locked

Our expert Writers have done this assignment before, you can reorder for a fresh, original and plagiarism-free copy and it will be redone much faster (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

May 23, 2022

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • ■ As a reference for in-depth understanding of the subject.
  • ■ As a source of ideas / reasoning for your own research (if properly referenced)
  • ■ For editing and paraphrasing.

This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

Get Free Price Quote