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:

Symmetric

Referring to a shape or function that is mirrored equally on both sides of a central axis.

Skewed

A description of data that are not symmetrically distributed, often showing a longer tail on one side of the distribution's peak.

Negatively Skewed

A distribution where the tail is longer on the left side of the distribution, indicating that the majority of data points are located on the right.

Positively Skewed

A type of distribution in which the right tail (higher values) is longer than the left tail, indicating that a majority of the data points are clustered to the left of the mean.