CHAPTER 9 SOLUTIONS
Part I
1.
2.
3.
4.
5.
F
T
F
T
F
6.
7.
8.
9.
10.
T
T
T
F
T
Part II
11.
12.
13.
14.
15.
F
T
T
T
F
1.
2.
3.
4.
g
a
j
d
5.
6.
7.
8.
i
b
h
c
9.
10.
11.
12.
f
e
l
k
Part III
1. (c)
Employee turnover is a performance measure in the “Learning and Growth” balanced
scorecard category.
2. (a)
Answers (b) through (d) are examples of service businesses, whereas (a) is a
manufacturer of beverages.
3. (d)
Answers (a) through (c) are important guidelines to following when choosing measures
for a balanced scorecard. Employee compensation may be tied to achievement of the
measures, but the measures on which employees are evaluated must be understandable
to the employees and under their control.
4. (c)
Similar to a manufacturing company, the basic document used to accumulate costs for a
service business using job order costing is the job order cost sheet.
5. (a)
If the more highly paid partners control most of the secretarial support services,
professional labor dollars would be the most appropriate allocation base.
6. (a)
The budgeted income statement is the end point for the annual budget because all of the
other budgets must be completed before it can be prepared.
7. (d)
Examples of expenses in a professional services firm that could readily be traced to
individual jobs instead of needing to be allocated to those jobs include meals and travel.
8. (d)
The “Learning and Growth” balanced scorecard category would include “Employee
Turnover Ratio” as a performance measure.
9. (a)
Firms that use activity-based costing attempt to shift as many costs as possible out of
indirect cost pools and specifically trace them to individual jobs.
10. (b)
Peanut-butter costing refers to the practice of assigning costs evenly to jobs using an
overhead rate, even though different jobs consume resources in different
proportions.
S–34
Chapter Nine
Solutions
Part IV
1.
Henry and Jones
Revenue Budget
For the Year Ended December 31, 20-Item
Professional
Hours
Billing
Rate
Total
Revenues
Partners.............................
Associates ........................
Staff ..................................
Total .............................
4,000
7,000
11,000
22,000
$200
120
80
$ 800,000
840,000
880,000
$2,520,000
2.
3.
4.
5.
Henry and JonesCowher
Professional Labor Budget
For the Year Ended December 31, 20-Item
Professional
Hours
Wage
Rate
Total Labor
Dollars
Partners.............................
Associates ........................
Staff ..................................
Total .............................
4,000
7,000
11,000
22,000
$100
60
40
$ 400,000
420,000
440,000
$1,260,000
Henry and Jones
Overhead Budget
For the Year Ended December 31, 20-Item
Amount
Secretarial Support........................................................
Fringe Benefits ..............................................................
Depreciation—Building ...............................................
Utilities ..........................................................................
Depreciation—Equipment ............................................
Telephone/Fax...............................................................
Photocopying ................................................................
Total ..........................................................................
$230,000
190,000
90,000
43,000
40,000
31,000
22,000
$646,000
Henry and Jones
Other Direct Expenses Budget
For the Year Ended December 31, 20-Item
Amount
Travel ............................................................................
Meals .............................................................................
Total ..........................................................................
$54,000
18,000
$72,000
Henry and Jones
Budgeted Income Statement
For the Year Ended December 31, 20-Revenues .......................................................................
$2,520,000
Operating Costs:
Professional Labor .......................
$1,260,000
Overhead Support ........................
646,000
Other Direct Expenses .................
72,000
1,978,000
Operating Income..........................................................
$ 542,000
S–35
Solutions
Chapter Nine
Part V
1.
Hartwell
Industries
Professional Labor Cost:
50 hrs. × $57.14* .......................................
45 hrs. × $57.14 .........................................
Professional Support:
50 hrs. × $39.05** .....................................
45 hrs. × $39.05 .........................................
Total ...........................................................
James Kimmel
$2,857
$2,571
1,953
$4,810
1,757
$4,328
Computations:
**
($125,000  ) + ($70,000  5)
= $57.14
1,500  7
**
$410,000
= $39.05
10,500 hrs.
2.
Hartwell
Industries
Professional Labor Cost:
10 hrs. × $83.33* .......................................
30 hrs. × $83.33 .........................................
Associate Labor Cost:
40 hrs. × $46.67** .....................................
15 hrs. × $46.67 .........................................
Litigation Support:
$833 × $1.12*** ........................................
$2,500 × $1.12 ...........................................
Secretarial Support:
50 hrs. × $12.38**** .................................
45 hrs. × $12.38 .........................................
Total ...........................................................
Computations:
S–36
****
(2  $125,000)
= $83.33
1,500  2
****
5  $70,000
= $46.67
1,500  5
****
$280,000
= $1.12
(2  $125,000)
****
$130,000
= $12.38
(7  1,500)
James Kimmel
$ 833
$2,500
1,867
700
933
2,800
619
$4,252
557
$6,557
Chapter Nine
Solutions
Part VI
Performance
Measure
Financial
Revenue from
new products
Customer
satisfaction
surveys
Time from
receipt of order
to shipment
Percentage of
compensation
based on team
performance
Percentage of
employees
trained in new
processes
Time taken to
replace defective
products
Percentage of
products
returned
Gross margin
percentage
Market share
Percentage of
defect-free units
Number of
employee
suggestions
Operating
income
Percentage of
on-time
deliveries
Employee
turnover ratio
Return on
investment
Number of new
customers
X
Customer
Internal
Business
Processes
Learning and
Growth
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
S–37