Ryan & Marks, Design Consultants, Has the Following Budget for the Year

question 23

Essay

Ryan & Marks, Design Consultants, has the following budget for the year:
$$\begin{array} { l r } \text { Direct labor (for professional hours charged to clients) } & \$ 202,000 \\\text { Overhead } & \\\text { Indirect materials } &10,000 \\ \text { Indirect labor } & 150,000 \\\text { Depreciation - Building } &50,000 \\\text { Depreciation - Furniture } & 5,000 \\\text { Utilities } &12,000 \\\text { Insurance } &4,800 \\\text { Property taxes } & 5,200 \\\text { Other expenses } &\underline{ 3,380}\\\text { Total } & \underline{ \$ 240,380}\end{array}$$
The firm uses direct labor as the cost driver to apply overhead to clients. During January, the firm worked for many clients; data for two of them follow:
$\begin{array}{llr} \text {Henderson account: } &\\ \text { Direct materials } &\$400\\ \text { Direct labor } &3,000\\ \text { Fisher account:} &\\ \text { Direct materials} &\$5,380\\ \text { Direct labor } &12,600\\\end{array}$

Required:
(a) Compute the company'sRyan & Marks budgeted overhead rate. Explain how this is used.
(b) Compute the amount of overhead to be charged to the Henderson and Fisher accounts using the predetermined overhead rate calculated in requirement (a).
(c) Compute the separate job cost for the Henderson and Fisher accounts.

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Definitions:

Shareholders' Equity

The residual interest in the assets of an entity after deducting liabilities, representing the ownership stake of shareholders.

Fixed Assets

Long-term tangible assets used in the operation of a business that are not intended for sale, such as buildings, machinery, and equipment.

Intangible Assets

Non-physical assets possessed by a business, such as copyrights, patents, trademarks, and goodwill, that have value and can be used to produce revenue.

Fair Value

The income expected from liquidating an asset or the cost associated with delegating a liability in an organized market interaction at the measurement moment.