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 reported for the period. Presented below are the results

Columbus Cincinnati Dayton Total

Sales $1,500 $1,419 $1,067 $3,986

less

Direct labor (382) (317) (317) (1,016)

Direct materials (281) (421) (185) ( 887)

Overhead (710) (589) (589) (1,888)

Net Income $127 $92 ($24) $195

Overhead items are accumulated in one overhead pool for the entire firm and then allocated to the branches based on direct labor dollars. For fiscal 2016 this predetermined rate was $1.859 for every direct labor dollar incurred by an office. The overhead pool includes rent, depreciation, taxes, etc. regardless of which office incurred the expense. Management is concerned with the results of the fiscal 2016 performance reports. During a review of the overhead, it became apparent that many items of overhead were not correlated with the direct labor dollars. Management decided to apply overhead based on direct tracing where possible and to apply Activity Based Costing (ABC) to model the profitability of each branch.

Results of Overhead Analysis An analysis of the overhead revealed that facility sustaining costs for rent, utilities, depreciation, property taxes, etc. could be traced directly to the office where the costs were incurred ($ in thousands).

Columbus Cincinnati Dayton Total

Direct Overhead $180 $270 $177 $627

Activity pools and activity drivers determined from the accounting records and staff surveys are presented in the table.

# Activities by Location Activity Pools Activity Driver Columbus Cincinnati Dayton General Administration $409,000 Direct Labor $382,413 $317,086 $317, 188 Dollars Project Costing $48,000 # of Timesheet 6,000 3,800 3,500 Entries Accounts $139,000 # of Vendor 1,020 850 400 Payable/Receiving Invoices Accounts Receivable $47,000 # of Client 588 444 96 Invoices Payroll/Mail Sort & $30,000 # of Employees 23 26 18 Delivery Personnel Recruiting $38,000 # of New Hires 8 4 Employee Insurance $14,000 # of Claims Filed 230 260 180 Processing Proposals Accepted by $139,000 # of Proposals 200 250 60 Clients Accepted Sales Meeting/Sales Aids |$202,000 Contracted Sales $1,824,439 1,399,617 $571,208 Shipping $24,000 # of Projects 99 124 30 Ordering $48,000 # of Purchase 135 110 80 Orders Duplicating Costs $46,000 # of Copies 162,500 146,250 65,000 Duplicated Blueprinting $77,000 # of Blueprints 39,000 31,200 16,000 $1,261,000