5th Edition

ISBN: 9780134128528

Author: Karen W. Braun, Wendy M. Tietz

Publisher: PEARSON

Concept explainers

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing …

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In compari…

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Textbook Question

Chapter 3, Problem 3.52BP

Use job costing at an advertising agency (Learning Objectives 3, 4, & 7)

Unchil & Doshak is an advertising agency. The firm uses a job cost system in which each client is a different “job.” Unchil & Doshak traces direct labor, software licensing costs, and travel costs directly to each job (client). The company allocates indirect costs to jobs based on a predetermined indirect cost allocation rate based on direct labor hours.

At the beginning of the current year, managing partner Anoop Unchil prepared a budget:

Direct labor hours (professional)	17,100 hours
Direct labor costs (professional)	$2,052,000
Support staff salaries	$ 305,000
Rent and utilities	$ 46,000
Supplies	$ 319,300
Lease payments on computer hardware	$ 65,000

During January of the current year, Unchil & Doshak served several clients. Records for two clients appear here:

	Go trip.com	Port South Golf Resort
Direct labor hours	770 hours	65 hours
Software licensing costs	$2,100	$400
Travel costs	$7,000	$ 0

Requirements

1. Compute Unchil & Doshak’s predetermined indirect cost allocation rate for the current year based on direct labor hours.
2. Compute the total cost of each job.
3. If Unchil & Doshak wants to earn profits equal to 20% of sales revenue, how much (what total fee) should it charge each of these two clients?
4. Why does Unchil & Doshak assign costs to jobs?

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Chapter 3, Problem 3.51BP

Chapter 3, Problem 3.53BP

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Using job order costing in a service company Bluebird Design, Inc. is a Web site design and consulting firm. The firm uses a job order costing system in which each client is a different job. Bluebird Design assigns direct labor, licensing costs, and travel costs directly to each job. It allocates indirect costs to jobs based on a predetermined overhead allocation rate, computed as a percentage of direct labor costs. At the beginning of 2018, managing partner Sally Simone prepared the following budget estimates: In November 2018, Bluebird Design served several clients. Records for two clients appear here: Requirements Compute Bluebird Designs direct labor rate and its predetermined overhead allocation rate for 2018. Compute the total cost of each job. If Simone wants to earn profits equal to 50% of service revenue, what fee should she charge each of these two clients? Why does Bluebird Design assign costs to jobs?

This week we are studying job order costing. In order to better understand what job order costing is, you will also need to have a basic understanding of process costing. Please briefly explain these two types of costing systems and provide us with an example of a real-world company that would use job order costing and one that would use process costing. Requirement 2: Please distinguish between prime costs and conversion costs and provide us with an example of each. Requirement 3: Please explain the difference between a prime cost and a product cost and provide us with an example of each.

Click to watch the Tell Me More Learning Objective 1 video and then answer the questions below. 1. Which of the following manufacturers is most likely to use a process cost system? Purse manufacturer Sports drink manufacturer Automobile manufacturer Guitar manufacturer 2. Process and job order cost systems are similar in that both systems _______. record and summarize product costs classify product costs as direct materials, direct labor, and factory overhead allocate factory overhead costs to products All of these choices are correct.

Chapter 3 Solutions

Managerial Accounting (5th Edition)

Ch. 3 - (Learning Objective 1) For which of the following...Ch. 3 - (Learning Objective 2) Which of the following...Ch. 3 - (Learning Objective 2) Which of the following...Ch. 3 - (Learning Objective 3) The amount of manufacturing...Ch. 3 - (Learning Objective 4) Which of the following is...Ch. 3 - (Learning Objective 5) Which of the following is...Ch. 3 - (Learning Objective 5) Assuming the amount of...Ch. 3 - Prob. 8QC Ch. 3 - Prob. 9QC Ch. 3 - Prob. 10QC

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Solution Summary: The author explains that U&D is a service firm, which incurs indirect operating expenses such as office rent, office supplies etc. which cannot be traced to individual jobs.

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