Following Is Information About Allen's Accounting Services

question 88

Essay

Following is information about Allen's Accounting Services:
Professional Professional
Labour Cost Direct Costs Labour Hours
Client 57 $2,000 $800 20
Client 58 $1,000 $200 10
Client 59 $5,000 $600 50
Allen's Accounting Services uses job costing and applies overhead using a normal costing system using professional labour cost as the allocation base. This period's estimated overhead cost is $400,000, estimated professional labour cost is $800,000 and estimated direct labour hours are 8,000. This period's actual overhead cost was $426,400, actual direct labour cost was $820,000, and actual direct labour hours were 8,200.
a)What is the overhead allocation rate?
b)What is the total cost for Client 57?

---

Definitions:

Raw Materials Inventory

The stock of unprocessed materials waiting to be used in the manufacturing process.

Operations

A series of actions or activities conducted in a business or system to produce or achieve certain results or goods.

Job-Order Costing

A costing system that tracks costs individually for each job, suitable for manufacturing or service sectors that produce unique products or services.

Unadjusted Cost of Goods Sold

The total cost attributed to products that have been sold over a period, without any adjustments for inventory changes or other factors.