Question

Quah Consulting, a real estate consulting firm, specializes in advising companies on potential new plant sites. Quah Consulting uses a job costing system with a predetermined indirect cost allocation rate computed as a percentage of direct labour costs. At the beginning of the year, managing partner Adora Quah prepared the following plan, or budget, for the year: 156 Chapter 3
Direct labour hours (professionals) .......................................... 14,000
Direct labour costs (professionals)............................................ $2,150,000
Office rent................................................................................ 250,000
Support staff salaries................................................................ 870,000
Utilities..................................................................................... 350,000
At the end of the year, the company had actually incurred the following:
Direct labour cost..................................................................... $1,230,000
Depreciation on manufacturing plant and
equipment............................................................................ 490,000
Property taxes on plant............................................................ 18,500
Sales salaries............................................................................. 24,000
Delivery drivers’ wages............................................................. 16,000
Plant janitors’ wages ................................................................ 11,000
Machine hours........................................................................ 57,000 hours
Requirements
1. Compute Smith’s predetermined manufacturing overhead rate.
2. How much manufacturing overhead was allocated to jobs during the year?
3. How much manufacturing overhead was incurred during the year? Is manufacturing over-head underallocated or overallocated at the end of the year? By how much?
4. Were the jobs overcosted or undercosted? By how much?


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  • CreatedApril 30, 2015
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