Question

Cheney & Partners, a Quebec-based public accounting partnership, specializes in audit services. Its job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (audit support, which contains all costs of the Audit Support Department). Audit support costs are allocated to individual jobs using actual professional labor-hours. Cheney & Partners employs 10 professionals to perform audit services.
Budgeted and actual amounts for 2014 are as follows:


Required
1. Compute the direct-cost rate and the indirect- cost rate per professional labor- hour for 2014 under
(a) Actual costing,
(b) Normal costing,
(c) The variation from normal costing that uses budgeted rates for direct costs.
2. Which job-costing system would you recommend Cheney & Partners use? Explain.
3. Cheney’s 2014 audit of Pierre & Co. was budgeted to take 170 hours of professional labor time. The actual professional labor time spent on the audit was 185 hours. Compute the cost of the Pierre & Co. audit using
(a) Actual costing,
(b) Normal costing,
(c) The variation from normal costing that uses budgeted rates for direct costs. Explain any differences in the jobcost.


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  • CreatedMay 14, 2014
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