Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Miami Valley Architects, Inc., provides a wide range of engineering and architectural consulting services through its three branch offices in Columbus, Cincinnati, and Dayton, OH.
Miami Valley Architects, Inc., provides a wide range of engineering and architectural consulting services through its three branch offices in Columbus, Cincinnati, and Dayton, OH. 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 year 2013 (in thousands) follows: Sales Less: Direct labor Direct Materials Overhead Net Income Prod OH Rate = $1.859 Columbus $1,500 $382 $281 Direct Overhead $710 $127 Cincinnati Columbus $1,419 $317 $421 $589 $92 $180 Dayton Miami Valley accumulates overhead items in one overhead pool and allocates it to the branches based on direct labor dollars. For 2013, this 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. $1,067 $317 $185 $589 -$24 Management is concerned with the 2013 operating results. During a review of overhead expenses, management noticed that many overhead items were clearly not correlated to the movement in direct labor dollars as previously assumed. Management decided that applying overhead based on activity-based costing and direct tracing wherever possible should provide a more accurate picture of the profitability of each branch. Cincinnati An analysis of the overhead revealed that the following dollars for rent, utilities, depreciation, and taxes could be traced directly to the office that incurred the overhead ($ in thousands): $270 Total $3,986 $1,016 $887 Dayton $1,888 $195 $177 Total $627
Step 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