Morgan Engineering Company employs three professional engineers, each having a different specialty. Don Corbin specializes in structural engineering: Bob Rouse, clectrical engineering; and Bill Phillips, mechanical engineering. The firm expects to incur the following operating costs for 2000 ; travel and materials costs are billed separately to clients.

\begin{tabular}{lr}

Office salaries and wages & $\$ 36,000$ \\

\hline Office supplies & 20,000 \\

\hline Utilities and telephone & 15,400 \\

\hline Depreciation & 16,200 \\

\hline Taxes and insurance & 10,300 \\

\hline Miscellaneous expenses & 2,100 \\

\hline Total estimated costs for 2000 & $\underline{\$ 100,000}$ \\

\hline

\end{tabular}

The salaries and billable hours of the three engineers are expected to be as follows:

1. Compute the overhead cost rate that should be used for each of the engineers (based on the expected hours to be billed, with overhead cost rates varying in proportion to each engineer's compensation) to ensure that the total expected operating costs for 2000 will be recovered from clients. (Hint: Allocate total estimated overhead costs to each engineer based on relative salaries, then relate the allocated costs to the hours expected to be worked by each.)
2. Using the overhead cost rates determined in (1), determine the costs associated with the firm's work for Seaside Company with the following engineering services and related costs: Corbin, 100 hours; Rouse, 40 hours; Phillips, 10 hours; transportation and supplies costs, $\$ 1,600$.

Transcribed Image Text:

Corbin. Rouse. Phillips Total. Expected Salary $ 60,000 Expected Hours 2,000 48,000 1,760 42,000 1,925 $150,000 5,685