6 Part 1 of 2 10 points Required information [The following information applies to the questions displayed below.] Miami Valley Architects Inc. provides a wide range of engineering and architectural consulting services through its three branch offices in Columbus, Cincinnati, and Dayton, Ohio. The company allocates resources and bonuses to the three branches based on the net income of the period. The results of the firm's performance for the most recent year follows ($ in thousands): Columbus Cincinnati Dayton Sales eBook $1,500 $1,419 $1,067 Total $3,986 Direct Less: Labor 382 317 317 1,016 Direct 281 421 185 887 Print materials Overhead Net income 710 $ 127 589 589 1,888 $ 92 $ (24) $ 195 Reference Miami Valley accumulates overhead items in one overhead pool and allocates it to the branches based on direct labor dollars. For this year, the predetermined overhead rate was $1.859 for every direct labor dollar incurred by an office. The overhead pool includes rent, depreciation, and taxes, regardless of which office incurred the expense. Some branch managers complain that the overhead allocation method forces them to absorb a portion of the overhead incurred by the other offices. Management is concerned with the recent operating results. During a review of overhead expenses, management noticed that many overhead items were clearly not correlated to the movement in direct labor dollars as previously assumed. Management decided that applying overhead based on activity-based costing and direct tracing wherever possible should provide a more accurate picture of the profitability of each branch. An analysis of the overhead revealed that the following dollars for rent, utilities, depreciation, and taxes could be traced directly to the office that incurred the overhead ($ in thousands): Columbus Cincinnati Dayton Total Direct overhead $180 $270 $177 $627 Activity pools and their corresponding cost drivers were determined from the accounting records and staff surveys as follows: General administration $ 409,000 Project costing 48,000 Accounts payable/receiving 139,000 Accounts receivable 47,000 Payroll/Mail sort and delivery 30,000 Personnel recruiting 38,000 Employee insurance 14,000 processing Proposals 139,000 Sales meetings/Sales 202,000 aids Shipping 24,000 Ordering 48,000 Duplicating costs 46,000 Blueprinting 77,000 $1,261,000