Following are the 2022 estimated and actual recorded subsidiary ledger results from several jobs for an architectural firm:

The president is concerned with the wide differences and with the loss on Job 24.
a. Estimated costs per job used to calculate the bid sales price are as follows:

Compare the estimated costs to the total actual recorded cost per job.

b. Discuss reasons why the estimated job costs and the recorded job costs may be different.

c. The president is concerned with assigning all indirect costs based on architects’ hours (direct labor). Do you believe that some overhead costs may relate to drivers (bases) other than the architects’ time causing distortions in applying a single driver overhead rate? Discuss possible improvements in this process.

d. What other information would you like to know about this situation?

e. Which business decisions would be affected if the company uses incorrect estimated and recorded costs per job?

Transcribed Image Text:

Bid sales price: at 120% of estimated costs Actual direct materials Actual direct labor Allocated overhead: at 40% of direct labor Recorded job margin Job 24 $15,600 (3,000) (10,000) (4,000) ($1,400) Job 26 $26,400 (5,000) (12,000) (4,800) $4,600 Job 29 $44,000 (7,000) (20,000) (8,000) $9,000