[sagnik2422]

Hi I am studying in advance of taking Managerial Accounting and need some help with steps on this problem:




Security Pension Services helps clients to set up and administer pension plans that are in compliance
with tax laws and regulatory requirements. The firm uses a job-order costing system in which
overhead is applied to clients’ accounts on the basis of professional staff hours charged to the accounts.
Data concerning two recent years appear below:
2008:
Estimated professional staff hours to be charged to clients accounts : 4,600
Estimated Overhead Cost : $310,500
Professional Staff Hours Available : 6,000
2009 :
Estimated professional staff hours to be charged to clients accounts : 4,500
Estimated Overhead Cost : $310,500
Professional Staff Hours Available : 6,000
“Professional staff hours available” is a measure of the capacity of the fi rm. Any hours available
that are not charged to clients’ accounts represent unused capacity. All of the firm’s overhead is
fixed.
Required:
1. Marta Brinksi is an established client whose pension plan was set up many years ago. In both
2008 and 2009, only 2.5 hours of professional staff time were charged to Ms. Brinksi’s account.
If the company bases its predetermined overhead rate on the estimated overhead cost
and the estimated professional staff hours to be charged to clients, how much overhead cost
would have been applied to Ms. Brinksi’s account in 2008? In 2009?
I know the formula : Predetermined
overhead rate =
Estimated total manufacturing overhead cost divided by Estimated total amount of the allocation base but don't know how to apply it

[paraclete]

You have two choices; estimate that the firms business might expand and base overhead distribution on available hours or be realistic and base overhead distribution on estimated billable hours. In manufacturing variances are calculated but in this case not to bill the client on billable hours results in a loss which will not be recovered