Morgan & Morgan Is a Small Firm That Assists Clients

question 45

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.
$\begin{array}{|l|c|c|}\hline & \text { Preparation } & \text { Research \& Planing } \\\hline \text { Accountant hours } & 8,000 & 3,000 \\\hline \text { Ressearch hours } &0& 3,000 \\\hline \text { Accountant labor costs } & \$ 480,000 & \$ 135,000 \\\hline \text { Materials and supplies } & 10,000 & 5,000 \\\hline \text { Overhead costs } & 230,400 & 204,000 \\\hline\end{array}$
Client No. 2006-713 was completed during April of the current year and incurred the following costs and hours:
$\begin{array}{|l|l|l|}\hline & \text { Preparation } & \text { Research \& Plaving } \\\hline \text { Accountant hours } & 30 & 4 \\\hline \text { Research hours } & 0 & 8 \\\hline \text { Materials and supplies } & \$ 25 & \$ 15 \\\hline \text { Accountant labor costs } & 1,800 & 180 \\\hline\end{array}$
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:

Free Gift

An item or service given without an exchange of payment. The term is somewhat redundant since gifts are typically free.

Superordinate Goals

Shared goals that override individual differences and can only be achieved by cooperative efforts.

Shared Goals

Objectives or aims that are pursued by more than one person or group, often leading to cooperation in efforts to achieve the outcome.

Cooperation

The process of groups working or acting together for a common purpose or benefit.