Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Hi, please I need help with this question, lots of appreciation. Hello Expert, please assist me with this Managerial Accounting question, thanks. In preparing the
Hi, please I need help with this question, lots of appreciation. Hello Expert, please assist me with this Managerial Accounting question, thanks. In preparing the Profit Report, choose any of these Account Tittles; Sales, Income Before Taxes, Allocated Costs. Direct Costs, Add, Less.
Icon.com sells software and provides consulting services to companies that conduct business over the Internet. The company is organized into two lines of business (software and consulting), and profit statements are prepared as follows: Direct costs include costs that are easily associated with each line of business. For software, this includes the salary of programmers, the cost of computers used by programmers, and the cost of software manuals sold to customers. For consulting, direct costs include consultant salaries, computer costs, and travel costs. Allocated costs include costs that are not directly traced to the business units. These costs include employee benefits, rent, telecommunications costs, and general and administrative costs, such as the salary of the CEO of Icon.com. At the start of 2020 , allocated costs were estimated as follows: In the past, allocations have been based on headcount (the number of employees in each business unit). Software had 375 employees and consulting had 125 employees. The new controller of Icon.com believes that the key driver of employee benefits and telecommunications costs is headcount. However, rent is driven by space occupied, and general and administrative costs are driven by relative sales. Icon.com rents 40,000 square feet; approximately 20,000 is occupied by software employees and 20,000 by consulting personnel. Prepare profit reports for software and consulting assuming the company allocates costs using headcount, space occupied, and sales as allocation bases. Which provides the best information on profitability: a single overhead cost pool with headcount as the allocation base, or multiple cost pools using headcount, sales, and space occupied? Assume the controller's assumptions are correctStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started