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1. Service Industry, Job Costing Lyon & Associates is a law firm specializing in labor relations and employee-related work.

It employs 2o professionals (5 partners and 15 associates) who work directly with its clients. The average budgeted total compensation per professional for 2008 is $97,500. Each professional is budgeted to have 1250 billable hours to clients in 2008. All professionals work for clients to their maximum 1250 billable hours available. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of Lyon & Associates other than professional labor costs are included in a single indirect-cost pool (legal support) and are allocated to jobs using professional labor-hours as the allocation base. The budgeted level of indirect costs in 2008 is $1,750,000. The cost estimates for the Richardson, Inc. job, which requires 100 budgeted hours of professional labor and for the punch, Inc. job which requires 160 budgeted hours of professional labor are as follows: Richardson Punch Direct costs $7,800 $12,480 Indirect costs 7,000 11,200 Total costs $14,800 23,680 Pro Partner Labor Pro Associate Labor Number of Professionals 5 15 Hours of billable time per professional 1250 1250 per year Total compensation(avg per professional) 165,000 75,000 Budgeted information for 2008 related to the two indirect-cost categories is General Support Secretarial Support Total costs $1,375,000 375,000 Cost Allocation base Professional laborhours Partner labor hours Requirements 1. Compute the 2008 budgeted direct-cost rates for (a) professional partners and (b) professional associates. 2. Compute the 2008 budgeted indirect cost rates for (a) general support and (b) secretarial support. 3. Compute the budgeted costs for the Richardson and Punch jobs, given the following information: Richardson, Inc. Punch, Inc. Professional partners 40 hours 32 hours Professional associates 60 hours 128 hours 4. Comment on the results in Req 3. Why are the job costs different from those computed using the firms previous method.

2. The Memory Fit shoes Company operates a chain of shoe stores that sell 10 different styles of inexpensive mens shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. Memory Fit is considering opening another store that is expected to have revenue and cost relationships shown here Unit Variable Data (per pair of shoes) Selling price $33.00 Cost of shoes 22.00 Sales commission 1.00 Variable cost per unit 23.00 Annual Fixed costs Rent 60,000 Salaries 211,000 Advertising 86,000 Other fixed costs 21,000 Total fixed costs 378,000

Requirements 1. What is the annual breakeven point in (a) units sold and (b) revenues? 2. If 31,000 units are sold, what will be the stores operating income (loss)? 3. If sales commissions are discounted and fixed salaries are raised by a total of $84,000, what would be the annual breakeven point in (a) units sold and (b) revenues? 4. Refer to original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.40 per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues? 5. Refer to original data. If, in addition to his fixed salary, the store manager is paid a commission of $0.40 per unit in excess of the break-even point, what would be the stores operating income if 57,000 units were sold. The Cole Corporation has the following account balances (in million): For Specific Date For Year 2009 Direct Materials inventory, Jan1, 2009 $13 Purchases of direct materials $330 Work-in-process inventory, Jan. 1, 2009 9 Direct manufacturing labor 85 Finished goods inventory, Jan 1.2009 76 Depreciation plant&equipment80 Direct materials inventory, Dec. 31,2009 24 Plant supervisory salaries 3 Work in process inventory, Dec. 31, 2009 3 Miscellaneous plant overhead 38 Finished goods inventory, DEC.31 2009 53 Revenues 945 Marketing, distribution and customers 255 Plant supplies used 9 Plant utilities 32 Indirect manufacturing labor 70

Begin by preparing the schedule cost of goods manufactured (in millions). Start with the direct materials and labor costs, then indirect manufacturing costs, and finally complete the schedule by calculating the cost of goods manufactured.

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