Question

Boxworth and Associates designs relatively small sports stadiums and arenas at various sites throughout the country. The firm's accountant prepared the following budget for the upcoming year

Professional staff salaries $3.000,000 Administrative support salaries 800,000 Other operating costs 200,000   

Eighty percent of professional staff salaries are directly traceable to client projects, a figure that falls to 60% for the administrative support staff and other operating costs. Traceable costs are charged directly to client projects; nontraceable costs, on the other hand, are treated as firm overhead and charged to projects by using a predetermined overhead application rate.

Boxworth had one project in process at year-end: an arena that was being designed for Charlotte County. Costs directly chargeable to this project were Professional staff salaries    90,000 Administrative support staff    17,300    Other operating costs 6,700

Required:

A.      Determine Boxworth's overhead for the year and the firm's predetermined overhead application rate. The rate is based on costs directly chargeable to firm projects.

B.      Compute the cost of the Charlotte County arena project as of year-end.

C.      Present three examples of "other operating costs" that might be directly traceable to the Charlotte County project.

Answer 1