Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Chrome-project due on 9/18/2021 - Managerial Accounting Section 01 Fall Semester 2021 CO westga.view.usg.edu/d21/le/content/2400669/fullscreen/44677451/View project1 due on 9/18/2021 Outside Environment, Inc. provides commercial landscaping services

image text in transcribed

image text in transcribed

image text in transcribed

Chrome-project due on 9/18/2021 - Managerial Accounting Section 01 Fall Semester 2021 CO westga.view.usg.edu/d21/le/content/2400669/fullscreen/44677451/View project1 due on 9/18/2021 Outside Environment, Inc. provides commercial landscaping services in San Diego. Sasha Cairns, the firm's owner, wants to develop cost estimates that she can use to prepare bids on jobs. After analyzing the firm's costs, Cairns has developed the following preliminary cost estimates for each 1,000 square feet of landscaping Direct material.......... $390 Direct labor (5 direct-labor hours at $11 per hour 56 Overhead (at $18 per direct-labor hour) 90 Total cost per 1,000 square feet......... $535 Cairns is quite certain about the estimates for direct material and direct labor. However, she is not as comfortable with the overhead estimate. The estimate for overhead is based on the overhead costs that were incurred during the past 12 months as presented in the following schedule. The estimate of $18 per direct-labor hour was determined by dividing the total overhead costs for the 12-month period ($1,296,000) by the total direct-labor hours (72,000). Regular Direct Overtime Direct Total Direct Total Overhead Labor Hours Labor Hours" Labor Hours January $ 108,000 $ 5820 380 6,200 February ......... 94,000 4,760 40 4.800 March 96,000 4,420 80 4,500 April 112,000 5,180 420 5,600 May 114,000 6,060 940 7,000 June 130,000 6,480 1,520 8,000 128,000 6,760 1,240 8,000 112,000 6,100 700 6.800 106,000 5,520 80 5,600 October 94,000 5,540 60 5,600 94,000 4,240 B0 4,300 December 108,000 5,120 480 5,600 $1,206,000 66,000 6.000 72.000 July August - September November Total O O 05:17 Chrome-project due on 9/18/2021 - Managerial Accounting Section 01 Fall Semester 2021 CO westga.view.usg.edu/d2/le/content/2400669/fullscreen/44677451/View project1 due on 9/18/2021 "The overtime premium 8 50 percent of the red-labor wage rate. Cairns believes that overhead is affected by total monthly direct-labor hours. Cairns decided to perform a least-squares regression of overhead (OH) on total direct-labor hours (DLH). Required: 1. Develop cost formula for overhead cost using least square regression method by constructing excel spreadsheet. 2. The overhead rate developed from the least-squares regression is different from Cairns' preliminary estimate of $18 per direct-labor hour. Explain the difference in the two overhead rates. 3. Using the overhead formula that was derived from the least-squares regression, determine a total variable-cost estimate for each 1,000 square feet of landscaping. 4 Cairns has been asked to submit a bid on a landscaping project for the city government consisting of 50,000 square feet. Cairns estimates that 30 percent of the direct-labor hours required for the project will be on overtime. Calculate the incremental costs that should be O 05:18 Chrome - project due on 9/18/2021 - Managerial Accounting Section 01 Fall Semester 2021 00 westga.view.usg.edu/d2/le/content/2400669/fullscreen/44677451/View project1 due on 9/18/2021 1. Develop cost formula for overhead cost using least square regression method by constructing excel spreadsheet 2. The overhead rate developed from the least-squares regression is different from Cairns' preliminary estimate of $18 per direct-labor hour. Explain the difference in the two overhead rates. 3. Using the overhead formula that was derived from the least-squares regression, determine a total variable-cost estimate for each 1,000 square feet of landscaping. Cairns has been asked to submit a bid on a landscaping project for the city government consisting of 50,000 square feet. Cairns estimates that 30 percent of the direct-labor hours required for the project will be on overtime. Calculate the incremental costs that should be 4. included in any bid that Cairns would submit on this project. Use the overhead formula derived from the least-squares regression. 5. Should management rely on the overhead formula derived from the least-squares regression as the basis for the variable overhead component of its cost estimate? Explain your answer. O 05:18 Chrome-project due on 9/18/2021 - Managerial Accounting Section 01 Fall Semester 2021 CO westga.view.usg.edu/d21/le/content/2400669/fullscreen/44677451/View project1 due on 9/18/2021 Outside Environment, Inc. provides commercial landscaping services in San Diego. Sasha Cairns, the firm's owner, wants to develop cost estimates that she can use to prepare bids on jobs. After analyzing the firm's costs, Cairns has developed the following preliminary cost estimates for each 1,000 square feet of landscaping Direct material.......... $390 Direct labor (5 direct-labor hours at $11 per hour 56 Overhead (at $18 per direct-labor hour) 90 Total cost per 1,000 square feet......... $535 Cairns is quite certain about the estimates for direct material and direct labor. However, she is not as comfortable with the overhead estimate. The estimate for overhead is based on the overhead costs that were incurred during the past 12 months as presented in the following schedule. The estimate of $18 per direct-labor hour was determined by dividing the total overhead costs for the 12-month period ($1,296,000) by the total direct-labor hours (72,000). Regular Direct Overtime Direct Total Direct Total Overhead Labor Hours Labor Hours" Labor Hours January $ 108,000 $ 5820 380 6,200 February ......... 94,000 4,760 40 4.800 March 96,000 4,420 80 4,500 April 112,000 5,180 420 5,600 May 114,000 6,060 940 7,000 June 130,000 6,480 1,520 8,000 128,000 6,760 1,240 8,000 112,000 6,100 700 6.800 106,000 5,520 80 5,600 October 94,000 5,540 60 5,600 94,000 4,240 B0 4,300 December 108,000 5,120 480 5,600 $1,206,000 66,000 6.000 72.000 July August - September November Total O O 05:17 Chrome-project due on 9/18/2021 - Managerial Accounting Section 01 Fall Semester 2021 CO westga.view.usg.edu/d2/le/content/2400669/fullscreen/44677451/View project1 due on 9/18/2021 "The overtime premium 8 50 percent of the red-labor wage rate. Cairns believes that overhead is affected by total monthly direct-labor hours. Cairns decided to perform a least-squares regression of overhead (OH) on total direct-labor hours (DLH). Required: 1. Develop cost formula for overhead cost using least square regression method by constructing excel spreadsheet. 2. The overhead rate developed from the least-squares regression is different from Cairns' preliminary estimate of $18 per direct-labor hour. Explain the difference in the two overhead rates. 3. Using the overhead formula that was derived from the least-squares regression, determine a total variable-cost estimate for each 1,000 square feet of landscaping. 4 Cairns has been asked to submit a bid on a landscaping project for the city government consisting of 50,000 square feet. Cairns estimates that 30 percent of the direct-labor hours required for the project will be on overtime. Calculate the incremental costs that should be O 05:18 Chrome - project due on 9/18/2021 - Managerial Accounting Section 01 Fall Semester 2021 00 westga.view.usg.edu/d2/le/content/2400669/fullscreen/44677451/View project1 due on 9/18/2021 1. Develop cost formula for overhead cost using least square regression method by constructing excel spreadsheet 2. The overhead rate developed from the least-squares regression is different from Cairns' preliminary estimate of $18 per direct-labor hour. Explain the difference in the two overhead rates. 3. Using the overhead formula that was derived from the least-squares regression, determine a total variable-cost estimate for each 1,000 square feet of landscaping. Cairns has been asked to submit a bid on a landscaping project for the city government consisting of 50,000 square feet. Cairns estimates that 30 percent of the direct-labor hours required for the project will be on overtime. Calculate the incremental costs that should be 4. included in any bid that Cairns would submit on this project. Use the overhead formula derived from the least-squares regression. 5. Should management rely on the overhead formula derived from the least-squares regression as the basis for the variable overhead component of its cost estimate? Explain your answer. O 05:18

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

Financial Accounting

Authors: Robert F. Meigs, Jan R. Williams, Susan F Haka, Mark S. Bettner

10th Edition

0072316373, 978-0072316377

More Books

Students also viewed these Accounting questions