Morgan & Morgan Is a Small Firm That Assists Clients

question 58

Essay

Morgan & Morgan is a small firm that assists clients in the preparation of their tax returns.The firm has five accountants and five researchers,and it uses job order costing to determine the cost of each client's return.The firm is divided into two departments: (1)Preparation and (2)Research & Planning.Each department has its own overhead application rate.The Preparation Department's rate is based on accountant labor costs and Research & Planning is based on the number of research hours.The following is the company's estimates for the current year's operations.
$\begin{array}{lrr}&\text { Preparation } & \text { Research \& } \\&&\text { Planning }\\\text { Accountant hours } & 8,000 & 3,000 \\\text { Research hours } & 0 & 3,000 \\\text { Accountant labor costs } & \$ 480,000 & \$ 135,000 \\\text { Materials and supplies } & 10,000 & 5,000 \\\text { Overhead costs } & 230,400 & 204,000\end{array}$
Client No.2006-713 was completed during April of the current year and incurred the following costs and hours:
$\begin{array}{lrr}&\text { Preparation }&\text { Research \& }\\&&\text { Planning }\\\text { Accountant hours } & 30 & 4 \\\text { Research hours } & 0 & 8 \\\text { Materials and supplies } & \$ 25 & \$ 15 \\\text { Accountant labor costs } & 1,800 & 180\end{array}$
a. Compute the overhead rates to be used by both departments.
b. Determine the cost of Client No. 2006-713, by department and in total.

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Definitions:

Organization's Reputation

The collective perceptions held by stakeholders about a company's credibility, reliability, and trustworthiness, influencing its success.

Voluntary Severance Packages

Offers made by employers to employees, providing incentives, often financial, to voluntarily leave the company, typically during downsizing.

Downsizing Strategy

A business strategy that involves reducing the company's size through workforce reduction, closing divisions, or selling off parts of the firm to improve efficiency or financial health.

Proactive Strategy

A forward-thinking approach that anticipates future conditions, challenges, or changes, and prepares or acts in advance to address them.