An Accounting Firm Completes an Audit for a Local Union $\text { Required: }$

question 195

Essay

An accounting firm completes an audit for a local union and has the following cost information for the year.
Indirect labor $60,000
Office lease $22,000
Depreciation on office equipment $8,000
Marketing expense $20,000
Utilities $15,000
The firm's direct labor costs are budgeted at $500,000 for the year and overhead is allocated based on direct labor costs.The firm used 1 partner and 2 audit associates on the audit.Partners are paid $150 per hour while audit associates earn $50 per hour.The partner spent 6 hours on the engagement while the audit associates spent a total of 40 hours.
$\text { Required: }$
What is the cost of the audit?

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Definitions:

Cost Reconciliation

The process of analyzing and adjusting the differences between the reported cost and the actual cost.

Direct Method

An approach in cost accounting used to allocate service departments' costs directly to production departments without intermediate steps.

Service Department

An organizational unit that provides support services to other parts of an organization, rather than directly contributing to revenue generation.

Pediatrics Department

A specialized medical department dedicated to the care, diagnosis, and treatment of infants, children, and adolescents.