Principles of Cost Accounting: Week 9 Assignment (P9-1, P9-2, P9-3, P9-4, P9-6)

Principles of Cost Accounting
Week 9 Assignment (P9-1, P9-2, P9-3, P9-4, P9-6)

P9-1 Job Cost Sheet for a Service Business
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. The engagement number is 525.

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

P9-2 Cost performance report and budgeted profit and actual profit for a service business
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:
1. Prepare a cost performance report
2. Compute the budgeted profit and the actual profit on the job.

P9-3 Preparing a revenue budget and a labor budget for a service business
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:
1. Prepare a revenue budget
2. Prepare a professional labor budget

P9-4 Preparing an overhead budget, an other expense budget, and a budgeted income statement
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:
1. Prepare an overhead budget
2. Prepare an other expenses budget
3. Prepare a budgeted income statement

P9-6 Allocations using simplified costing versus activity-based costing (Similar to Self-Study Problem)
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:
1. Prepare job cost sheets for Shank Products and Sayers Markets, using a simplified costing system with one direct and one indirect cost pool.
2. 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.
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