Reference no: EM133064292
Service Costing
Question 1: Determine the types of service organizations and the most appropriate costing system for each of the following firms:
Name
An accounting firm
An advertising agency
An electricity supplier
A law firm
A management consulting firm
A telecommunication company
An automotive repair shop
Airline ticketing counter
Question 2: Taylor & Associates, a consulting firm, has the following condensed budget for 2010. The firm has a single direct cost category (professional labour) and a single indirect-cost pool (client support). Indirect costs are allocated to jobs on the basis of professional labour costs.
The firm provides a consulting job for Red Rooster, a fast-food chain specialising in chicken. The breakdown of professional labour on the job is as follows:
Required:
1) Compute the 2010 budgeted indirect-cost rate/predetermined overhead rate for the firm;
2) Compute the cost of the Red Rooster job;
3) How much will the firm charge for the job if it is to earn its 40 per cent profit margin to total cost.
Question 3: Refer to the information in lecture example 2, if the firm uses a chargeout rate of $180/professional labour hour and 260 professional labour hours were actually worked on this job. How much will the firm charge the job? Explain the key differences between the method used in example 2 and example 3 to determine the service fees charged.
Key difference between the method used in example 2 and 3.
Question 4: ATS is a major provider of texts and stationary to secondary schools throughout South Australia. Students' orders to ATS go through 3 stages:
a) Order is received from the school and entered into the ATS inventory order system;
b) Books and stationary required to fill the order are drawn from inventory, packed and dispatched to the student;
c) Payment is received from the student and processed.
|
Cost
|
Receipt of order
|
Pack and despatch order
|
Receipt of payment
|
|
Staff salaries
|
$50 000
|
$125 000
|
$60 000
|
|
Equipment depreciation
|
420 000
|
145 000
|
240 000
|
|
Equipment Insurance
|
80 000
|
55 000
|
80 000
|
|
Telephone
|
4 000
|
3 000
|
2 000
|
|
Data processing
|
7 500
|
2 000
|
12 000
|
|
Postage
|
0
|
155 000
|
0
|
|
Consumables
|
3 000
|
35 000
|
2 000
|
The costs of these 3 processes in the year just ended are listed below.
During the year ATS processed 22000 student orders.
Required:
1) Calculate the total cost per order
2) Does the total cost per order provide a reliable estimate of the costs incurred to process each order?