Pearson Architectural Design began operations on January 2. The following activity was recorded in the company's Work in Process account for the first month of operations:

Work in Process

Costs of subcontracted work 90,000 To completed projects 570,000
Direct staff costs 200,000
Studio overhead 320,000


Pearson Architectural Design is a service firm, so the names of the accounts it uses are different from the names used in manufacturing companies. Costs of Subcontracted Work is comparable to Direct Materials; Direct Staff Costs is the same as Direct Labor; Studio Overhead is the same as Manufacturing Overhead; and Completed Projects is the same as Finished Goods. Apart from the difference in terms, the accounting methods used by the company are identical to the methods used by manufacturing companies.


Pearson Architectural Design uses a job-order costing system and applies studio overhead to Work in Process on the basis of direct staff costs. At the end of January, only one job was still in process. This job (the Krimmer Corporation Headquarters project) had been charged with $13,500 in direct staff costs.
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I need help in determing the predetermined overhead rate. I know that it is the estimated total manufacturing overhead cost divided by the estimated total amount of the allocation base. I have tried many things. Some of them just random just to try and get the right answer. I have tried --- 13500(320000/200000). I am completely lost. I am doing online classes and it takes a couple of days for my instructor to e-mail me back. This is due tomorrow and this is the only problem that I am stuck on. Is there a formula that I am missing or something? PLEASE HELP

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The second part of this problem was this:

Complete the following job cost sheet for the partially completed Krimmer Corporation Headquarters project.

Job Cost Sheet
Krimmer Corporation Headquarters Project
As of January 31
Costs of subcontracted work $ _____
Direct staff costs _______
Studio overhead _______

Total cost to January 31 $ ______

I was able to complete this part of it.
Job Cost Sheet
Krimmer Corporation Headquarters Project
As of January 31
Costs of subcontracted work $ 4900
Direct staff costs 13500
Studio overhead 21600

Total cost to January 31 $ 40000

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Not sure how to remove this, but I figured it out. I was getting the right answer all along, I just forgot to put it in percent form. I kept putting 1.6 when I should have put 160%

Hi I have the same problem and I was just wondering how you figured out Part II

Complete the following job cost sheet for the partially completed Krimmer Corporation Headquarters project.

Costs of subcontracted work	$
Direct staff costs
Studio overhead
Total cost to January 31 If you just explain to me what numbers and formulas you used to get your answers I will apply it to my numbers so I can learn how to do it. Thank you!

To complete the second part the direct staff costs is given in the problem. You get the studio overhead by multiplying the direct staff costs by 1.6 (the equivalent of 160%).

Costs of subcontracted work is a bit tricker as you have to add the original cost of subcontracted work to the direct staff costs (minus the cost of the project, 13,500 in this project) and then you need to take that number and multiply it by 1.6 and add that to the previous two numbers. It should look like this:

90,000 + (200,000 - 13,500) + (186,500 * 1.6)

90,000 + (186,500) + (298,400) = 574,900

Then take that number and subtract the number they list for 'To completed projects,' or in this case, 570,000.

574,900 - 570,000 = 4,900

That should be the answer for costs of subcontracted work.

I got the correct answer using different numbers so I hope nothing was lost in translation.

Good luck to all the people in the future going through the hell that is cost accounting.