WHAT FACTORS COULD AFFECT THE ACCURACY OF THESE ESTIMATES?Week 2 Textbook Exercises- Exercise 5.17 Job Costing, Service Sector: Consider the following budgeted data for a client job of Bob Crachit’s accounting firm.
Week 2 Textbook Exercises- Exercise 5.17 Job Costing, Service Sector: Consider the following budgeted data for a client job of Bob Crachit’s accounting firm. The client wants a fixed price quotation. Direct professional labor $20,000 Direct support labor 10,000 Fringe benefits for direct labor 13,000 Photocopying 2,000 Telephone calls 2,000 Computer equipment 6,000
Overhead is allocated at the rate of 100% of direct labor cost. Required: A. Prepare a schedule of the budgeted total costs for the client. Show subtotals for total direct labor costs and total costs as a basis for markup. B. Assume that the partner’s policy is to quote a fixed fee at 10% above the total costs. What fee would be quoted? C. Explain why the listed estimates for costs might not be similar to the actual costs for the job. What factors could affect the accuracy of these estimates? List as many factors as you can. Mini-Cases 6.55 – Costs of workplace health and safety Britain’s Health and Safety Executive (HSE) is a national regulatory body overseeing workplace health and safety. In its 2007 performance report, HSE reported the following statistics: • 241 workers were killed at work. • 141,350 employees suffered serious injuries at work. • 2.2 million people were suffering from an illness they believed was caused or made worse by their current or past work. 646,000 of these were new cases in the last 12 months. • 36 million days were lost overall (1.5 days per worker), 30 million due to work-related ill health and 6 million due to workplace injury. • £20 billion (approximately 2% of GDP) is the estimated annual cost to society of work-related accidents and ill health. To promote improved health and safety, HSE provides strategic direction, investigates and enforces regulations, and works with employers and other groups to promote better workplace practices. HSE provides guidance for common sources of injury or illness, including the following. • Slips, trips and falls • Hazardous substances such as chemicals, dust, fumes, and bacteria • Musculoskeletal disorders • Noise • Electricity • Work equipment and machinery • Maintenance and building work • Workplace transport • Fire and explosion • Radiation • Stress Required: a) Employers incur many costs because of health and safety issues, including: • Lost worker time • Employer-paid medical costs • Training to replace workers who are ill or injured • Record-keeping to comply with governmental regulation How would each of these costs be recognized in a process costing system? b) Who is responsible for workplace health and safety? Discuss the responsibilities for each of the following groups: • Governments • Workers • Employers • Customers • Managers
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