No.

4-20 page 138

1.
Machining department Assembly department
Indirect Manufacturing overhead Manufacturing overhead
cost pool

Machine-Haurs Direct
Cost Manufacturing
Allocation Base labor cost

Cost object
Allocated manufacturing overhead costs
product

Direct costs

Direct cost

Direct Direct
materials Manufactu-
ring labor

Budgeted manufacturing overhead divided by allocation base:

Machining Department overhead: $ 1800000 =

50,000
Assembly Department overhead: $3,600,000 =
$2,000,000

2. Machining department overhead allocated, 2,000 hours X $36

Assembly department overhead allocated, 180% X 15000
 Total manufacturing overhead allocated to Job 494

3.
Actual manufacturing
Manufacturing overhead
overhead allocated,
$36 X 55,000 machine-hours
180% X $2,200,000
Underallocated (Overallocated)

No. 4-21 page 139

1.

Machining department
Indirect Manufacturing overhead
cost pool

Professional
Cost labor cost
Allocation Base

Cost object
job for Indirect costs
consulting client
Direct costs

Direct cost Profession-

al labor
 Profession-
al labor

2. Budgeted indirect-cost rate for client support can be calculated as follows:

Budgeted indirect-cost rate = $13,000,000 + $5,000,000 = 260% of professional labor costs
At the budgeted revenues of $20,000,000 Taylor's operating income of $2,000,000 equals 10%
Markup rate = $20,000,000 + $5,000,000 = 400% of direct professional labor costs

3. Budgeted costs
Direct costs:
Director, $200 X 3 $600
Partner, $100 x 16 $1,600
Associate, $50 X 40 $2,000
Assistant, $30 160 $4,800
Consultng support, 260% X $9,000

Indirect costs:
Total costs

As calculated in requirement 2, the bid price to earn a 10% income-to-rev

direct professional costs. Therefore, Taylor should bid $9,000 = $36,000
price to earn target operating income-to-revenue margin of 10% can also

Direct costs
Indirect costs
Operating income (0.10 X $36,000)
Bid price
ment
verhead

t
uring
ost

ect
actu-
abor

$36 per machine-hour

180% of direct manufactur labor
costs

00 hours X $36 $72,000

% X 15000 27000
494 $99,000

Machining Assembly
Department Department
$2,100,000 $3,700,000
1,980,000
3960000
$120,000 ($260,000)
 lows:
rofessional labor costs
of $2,000,000 equals 10% of revenues.
nal labor costs

$9,000
$23,400

$32,400

earn a 10% income-to-revenue margin is 400% of

ould bid $9,000 = $36,000 for the Tasty Chicken job. Bid
ue margin of 10% can also be calculated as

$9,000
$23,400
$3,600
$36,000