Question
1)Cascade Construction Company creates custom-made waterfall landscapes. The firm reports the cost of client contracts using a normal absorption job-order costing system, and previously allocated
1)Cascade Construction Company creates custom-made waterfall landscapes. The firm reports the cost of client contracts using a normal absorption job-order costing system, and previously allocated all overhead on the basis of labor hours. They now calculate separate predetermined overhead rates for design hours and construction hours. For the current year, they projected 10,000 design hours and 40,000 construction hours, which they used to allocate $100,000 of overhead related to design and $300,000 of overhead related to construction.
For any given job, what must be the ratio of construction hours to design hours in order to guarantee that the job receives the same overhead under the current and previous accounting systems? Enter the ratio as a number below. For example, if the ratio would need to be 2 construction hours for each design hour, you should enter 2 below (no "+" sign for positive, but a "-" sign for negative).
2)Be Audit You Can Be is a law firm that defends clients from the IRS. They have a new accounting system that reports the cost of client contracts using a normal absorption job-order costing system. Their total overhead is projected to be $2,000,000 for the coming year, of which 40% is allocated on the basis of staff direct labor hours (DLH) and 60% is allocated on the basis of partner direct labor hours (DLH). Be Audit You Can Be projects 8,000 staff DLH and 4,800 partner DLH for the year. The company's previous accounting system allocated overhead on the basis of total DLH.
Circle the letter indicating the reported overhead allocated to a job that requires 400 staff hours and 100 partner hours.
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