Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Che Platinum Web Services designs and maintains websites for small business entrepreneurs. Competition has been intensifying in recent years and the company has been losing

image text in transcribed
image text in transcribed
Che Platinum Web Services designs and maintains websites for small business entrepreneurs. Competition has been intensifying in recent years and the company has been losing business to larger web design firms. Summary data concerning the last two years of operations follow: Estimated hours of service demanded Estimated overhead cost Actual hours of service provided Actual overhead cost incurred Hours of service available at capacity Last Year 1,700 $ 125,000 1,600 $ 125,000 2,500 This Year 1,450 $ 125,000 1,350 $ 125,000 2,500 The company applies its overhead costs to jobs using the hours of service provided as the allocation base. For example, this year and last year, 50 service-hours were required to maintain the website for a small company called Verde Consulting. All of Platinum's overhead costs are fixed, and the actual overhead cost incurred was exactly as estimated at the beginning of the year in last year and this year. Required: 1. Platinum Web Services computes its predetermined overhead rate at the beginning of each year based on the estimated overhead cost and the estimated hours of service demanded for the year. Using this approach, how much overhead would have been applied to the Verde Consulting job last year? How about this year? 2. The president of Platinum Web Services has heard that some companies in the industry have changed to a system of computing the predetermined overhead rate based on the hours of service available at capacity. He would like to know what effect this method would have on job costs. How much overhead cost would have been applied to the Verde Consulting job last year using this method? How much would have been applied this year? 3. If Platinum computes its predetermined overhead rate based on the hours of service available at capacity as in (2) above, how much

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Quality Auditing

Authors: B. Scott Parsowith

1st Edition

0873892402, 978-0873892407

More Books

Students also viewed these Accounting questions