SRN is an architectural firm that designs and builds buildings. It prices each job on a cost plus?20% basis. Overhead costs in 2017 are $6,030,000. SRN?'s simple costing system allocates overhead costs to its jobs based on number of jobs. There were three jobs in 2017. One customer, Norris?, has complained that the cost and price of its building in Chicago was not competitive. As a? result, the controller has initiated a detailed review of the overhead allocation to determine if overhead costs should be charged to jobs in proportion to consumption of overhead resources by jobs. She gathers the following? information: 1. Compute the overhead allocated to each project in 2017 using the simple costing system that allocates overhead costs to jobs based on the number of jobs. 2. Compute the overhead allocated to each project in 2017 using department overhead cost rates. 3. Do you think Norris had a valid reason for dissatisfaction with the cost and price of its? building? How does the allocation based on department rates change costs for each? project? 4. What? value, if? any, would SRN get by allocating costs of each department based on the activities done in that?department?

Quantity of Cost Drivers Used by Each Project Overhead Department Design Engineering Construction Cost Driver Design department hours Number of engineering hours Labor-hours Costs in 2017 Norris Derrick Mystiland 2,150,000 1,080,000 2,800,000 6,030,000 2,040 4,060 30,000 11,200 3,800 28,800 8,260 5,640 21,200