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Q. 19-10SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 1067

Short Answer

Haworth Company is a management consulting firm. The company expects to incur $167,500 of indirect costs this year. Indirect costs are allocated based on the following activities:

Activity

Estimated cost

Allocation Base

Estimated quantity of allocation base

Predetermined

Overhead allocation rate

Site visits

$ 45,000

Number of visits

900 visits

$ 50 per visit

Documentation Preparation

122,500

Number of pages

3,500 Pages

$ 35 per page

Total Indirect costs

$ 167,500

Haworth bills clients at 120% of the direct labor costs. The company has estimated direct labor costs at $240 per hour. Last month, Haworth completed a consulting job for Client 76 and used the following resources:

Allocation Base Client 76

Direct labor hours 60

Visits 5

Pages 50

Determine the total cost of the consulting job and the operating income earned.

Consulting job cost: $16,275

Operating Income: $1,005

See the step by step solution

Step by Step Solution

Calculation of consulting job cost for client 76

Calculation of operating Income

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