Homework: chapter 5 HW Score: 0 of 25 pts P5-32 (similar to) Save 6 of 6 (1 comp
ID: 2548884 • Letter: H
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Homework: chapter 5 HW Score: 0 of 25 pts P5-32 (similar to) Save 6 of 6 (1 complete) Hw Score: 1.89%, 2.37 of 125 pts Question Help Brady Associates is a recently formed law partnership. Brady Associates operates at capacity and uses a cost-based approach to pricing (billing) each job. Currently it uses a simple costing system with a single direct-cost category (professional labor-hours) and a single indirect-cost pool (general support). Indirect costs are allocated to cases on the basis of professional labor-hours per case. The job files for two of Brady's cdlients, Janek Enterprises and Tealstone Inc., show the following: (Cick the icon to view the data using the simple costing system.) Ell (Click the icon to view additicnal data.) Read the recuirements. Requirement 1. Calculate the revised indirect-cost allocation rate per professional labor-hour for Brady Associates when total indirect costs are $225,000. First determine the formula used to calculate the indirect-cost rate. Then enter the amounts in the formula and calculate the rate per hour. (Abbreviation used: prof. professional.) Indirect-cost rate per hour Requirements 1. Calculate the revised indirect-cost allocation rate per professional labor-hour for Brady Associates when total indirect costs are $225,000. 2. Compute the coets of the Janek Enterprises and Tealstone Inc. jobs if Brady Associates had used its refined costing system with multiple direct-cost categories and one indirect-cost pool. 3. Compare the costs of Janek Enterprises and Tealstone Inc. jobs in requirement 2 with those calculated using the simple costing system. Comment on the results. Print DoneExplanation / Answer
1. Revised ,Inddirect cost per hour
Indirect cost pool = Revised Indirect total cost / Professional hours
= 225,000 / 5,000 = $45 per hour
2. Computation of total cost of each product
Janek Enterprise
Direct Cost = 65,500
Professional Labor hour = $170 x 2,900 = 493,000
Indirect Revised cost = $45 x 2,900 = 130,500
Total Cost = 689,000
Tealstone Inc.
Direct Cost = 234,500
Professional Labor hour = $170 x 2,100 = 357,000
Indirect Revised cost = $45 x 2,100 = 94,500
Total Cost = 686,000
3. Under single costing system Janek had total cost of $797,500 whereas under mulitple costing it is only $689,000. This is less than the old system because under neew system some of the costs are allocated as direct costs which were earlier allocated on the basis hours worked. Since hours worked are more in Janek, this leads to over costing of the project.
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