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P
r
obl
e
m 1 –
S
e
rvi
c
e
Cost All
o
c
a
ti
on
Computer I
nfor
m
ati
on
S
ervi
c
e
s is a
computer
s
oftw
are
con
s
ulting
company. It
s three
m
aj
or function
al
areas are
computer
progr
a
mmi
ng, infor
m
ati
on
systems
con
s
ulting, and
s
oftw
are trai
ning.
C
ar
ol Birch,
a
pricing
a
n
aly
st i
n the Accounting
Department, has been
asked to
d
evel
op tot
al
costs f
or the function
al
areas. These costs will be
used as a
guid
e i
n pricing a new
contract. In
co
m
puting
these costs, Bir
ch i
s
con
si
d
eri
ng three
diff
ere
nt
methods of
all
oc
ati
ng
overhead costs-the
dir
e
ct
method, the
step method,
a
nd
the r
e
ciproc
al
method. Bir
ch
a
ss
e
m
bl
e
d the following data on
overhead fr
o
m it
s two
s
ervi
c
e
d
e
p
art
m
e
nt
s
, the Infor
m
ati
on
Systems Department and the
F
a
ciliti
e
s
D
e
p
art
m
e
nt.
I
nfor
m
ati
on
systems i
s
all
oc
ate
d on the b
a
sis of
hours of
computer usage; f
a
ciliti
e
s are
all
oc
ate
d on th
e
b
a
sis of fl
oor
s
p
a
c
e
.
R
e
qui
r
e
d
:
1. All
oc
ate the
s
ervi
c
e
department costs to the
user departments
u
si
ng
the
di
r
e
c
t
method. (Round to t
h
e
nearest
doll
ar and
provid
e t
ot
al
user department
co
sts)
2. All
oc
ate the
s
ervi
c
e
department costs to the
user departments
u
si
ng
the step method.
All
oc
ate
I
nfor
m
ati
on
Systems fir
st and round to the
nearest
doll
ar
.

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P
r
obl
e
m 2 – V
a
ri
a
n
c
e A
n
aly
sis
The XYZ
Company uses a standard cost
a
ccounting
system and
e
sti
m
ate
s
production
f
or the year to b
e
60,000
unit
s
. At thi
s v
olu
m
e
, the company’s v
aria
bl
e
overhead costs are $0.50 per
dir
e
ct
l
a
bor hour.
The
company’s
si
ngl
e product
has a
standard cost of $30.00 per
unit. Includ
e
d in the
$30.00 i
s $13.20 f
or dir
e
ct
m
aterial
s (3
yards) and $12.00 of
dir
e
ct l
a
bor (2
hours).
Pr
oduction infor
m
ati
on for the month of March follow
s:
R
e
qui
r
e
d
: (Be
sure to i
ndic
ate
whether the v
aria
nc
e
s are f
av
or
a
bl
e or
unf
av
or
a
bl
e
.)
a.
Compute the
dir
e
ct
m
aterial
pric
e varia
nc
e
.
b.
Compute the
dir
e
ct
m
aterial effi
ci
e
ncy
v
aria
nc
e
. c.
Compute the
dir
e
ct l
a
bor
pric
e (rate) varia
nc
e
.
d.
Compute the
dir
e
ct l
a
bor
effi
ci
e
ncy v
aria
nc
e

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