Sutherland Estimating Company employs three professional estimators, each having a different specialty. John Spencer specializes in structural
Question:
Sutherland Estimating Company employs three professional estimators, each having a different specialty. John Spencer specializes in structural estimating; Steve Ray, electrical estimating; and Dave Eugene, mechanical estimating. The firm expects to incur the following operating costs upcoming year.
Office salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 45,000
Office supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Utilities and telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Taxes and insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Total estimated costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $115,000
The salaries and billable hours of the three estimators are expected to be as follows:
Required:
1. Compute the overhead cost rate that should be used for each of the estimators (based on the expected hours to be billed, with overhead cost rates varying in proportion to each estimator's compensation) to ensure that the total expected operating costs for the year will be recovered from clients.
2. Using the overhead cost rates determined in part (1), determine the costs associated with the firm's work for Water-ship Company with the following estimating services and related costs: Spencer, 100 hours; Ray, 50 hours; Eugene, 25 hours.
Step by Step Answer:
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain