Required information The following information applies to the questions displayed below.) 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 of the period. The results of the firm's performance for the most recent year follows ($ in thousands): Columbus Cincinnati Dayton Total Sales $ $ 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 1,500 $ 1,419 Miami Valley accumulates overhead items in one overhead pool and allocates it to the branches based on direct labor dollars. For this year, the predetermined overhead rate was $1.859 for every direct labor dollar incurred by an office. The overhead pool includes rent, depreciation, and taxes, regardless of which office incurred the expense. Some branch managers complain that the overhead allocation method forces them to absorb a portion of the overhead incurred by the other offices. Management is concerned with the recent operating results. During a review of overhead expenses, management noticed that many overhead items were clearly not correlated to the movement in direct labor dollars as previously assumed. Management decided that applying overhead based on activity-based costing and direct tracing wherever possible should provide a more accurate picture of the profitability of each branch. An analysis of the overhead revealed that the following dollars for rent utilities, depreciation, and taxes could be traced directly to the office that incurred the overhead ($ in thousands): Direct overhead Columbus Cincinnati Dayton Total $ $ 180 $ 270 $ 177 627 Activity pools and their corresponding cost drivers were determined from the accounting records and staff surveys as follows: General administration Project costing Accounts payable/receiving Accounts receivable Payroll/Mail sort and delivery Personnel recruiting Employee insurance processing Proposals Sales meetings/Sales aids Shipping Ordering Duplicating costs Blueprinting $ 409,000 48,000 139,000 47,000 30,000 38,000 14,000 139,000 202,000 24,000 48,000 46,000 77,000 $ 1,261,000 Amount of Cost Driver Use by Location Cost Driver Columbus Cincinnati Dayton Direct labor cost $ 382,413 $ $ 317,086 317, 188 Timesheet entries 6,000 3,800 3,500 Vendor invoices 1,020 850 400 Client invoices 588 444 96 Employees 23 26 18 New hires 8 4 7 Insurance claims filed 230 260 180 Proposals 200 250 60 Contracted sales 1,824,439 1,399,617 571, 208 Projects shipped 99 124 30 Purchase orders 135 110 80 Copies duplicated 162,500 146, 250 65,000 Blueprints 39,000 31,200 16,000 Purchase orders Copies duplicated Blueprints 135 162,500 39,000 110 146,250 31,200 80 65,000 16,000 Required: 1. What overhead costs should be assigned to each branch based on ABC concepts? 2. What is the contribution of each branch before subtracting the results obtained in requirement 1? 3. What is the profitability of each branch office using ABC? Complete this question by entering your answers in the tabs below. Required Required Required 1 2 3 What overhead costs should be assigned to each branch based on ABC concepts? (Do not round intermediate calculations. Enter your answers in thousands of dollars, rounded to two decimal places.). Activity-based Overhead Allocation (in thousands) Cost Driver Columbus Cincinnati Dayton Total General administration Direct labor cost $ 0.00 Project costing Timesheet entries 0.00 Accounts payable/re ing Vendor Invoices 0.00 Accounts receivable Client invoices 0.00 Payroll/Mail sort and delivery Employees 0.00 Personnel recruiting New hires 0.00 Employee insurance processing Insurance claims filed 0.00 Proposals Proposals 0.00 Sales meetings/Sales aids Contracted sales 0.00 Shipping Projects shipped 0.00 Ordering Purchase orders 0.00 Duplicating costs Copies duplicated 0.00 Blueprinting Blueprints 0.00 Total $ 0.00 $ 0.00 $ 0.00 $ 0.00 Required 1 Required 2 >
