The Meyers CPA firm has the following overhead budget for the year: The firm est
ID: 2335265 • Letter: T
Question
The Meyers CPA firm has the following overhead budget for the year:
The firm estimates total direct labor cost for the year to be $2,151,250. The firm uses direct labor cost as the cost driver to apply overhead to clients.
During January, the firm worked for many clients; data for two of them follow:
Required:
1. Compute the firm’s predetermined overhead rate.
2. Compute the amount of overhead to be charged to the Gargus and Feller accounts using the predetermined overhead rate calculated in requirement 1.
3. Compute total job cost for the Gargus account and the Feller account.
Overhead Indirect materials $ 490,000 Indirect labor 1,885,000 Depreciation—Building 331,000 Depreciation—Furniture 63,000 Utilities 380,000 Insurance 53,000 Property taxes 67,000 Other expenses 173,000 Total $ 3,442,000Explanation / Answer
a) Predetermine overhead rate = Estimated overhead*100/Estimated labour cost
= 3442000*100/2151250
Predetermine overhead rate = 160% of direct labour cost
b) Overhead charged :
Gargus = 4400*160% = $7040
Feller = 10400*160% = $16640
c) Calculate total job cost :
Gargus Feller Direct labour 4400 10400 Overhead 7040 16640 Total job cost 11440 27040