Keating has just completed a review of its job-costing system. This review included a detailed analysis of
Question:
Keating has just completed a review of its job-costing system. This review included a detailed analysis of how past jobs used the firm€™s resources and interviews with personnel about what factors drive the level of indirect costs. Management concluded that a system with two direct cost categories (professional partner labour and professional manager labour) and two indirect cost categories (general support and administration support) would yield more accurate job costs. Budgeted information for 2013 related to the two direct cost categories is as follows:
REQUIRED 1. Compute the 2013 budgeted direct cost rates for (a) professional partners and (b) professional managers. 2. Compute the 2013 budgeted indirect cost rates for (a) general support and (b) administration support. 3. Compute the budgeted job costs for the Richardson and Punch jobs, given the following information:
4. Comment on the results in requirement 3. Why are the job costs different from those computed in Problem 4-36?
Transcribed Image Text:
Professional Partner Labour Number of professionals Hours of billable time per professional Total compensation (average per professional) Professional Manager Labour 20 1,600 per year S80,000 1,600 per year S200,000 Budgeted information for 2013 relating to the two indirect cost categories is General Support Administration Support Total costs Cost allocation base $1,800,000 Professional labour-hours $400,000 Partner labour-hours Actual Machine Hours Actual Direct Manufacturing Balance before Proration, December 31, 2013 Labour-Hours 69,000 6,900 16,100 83,200 12,800 32,000 $21,600,000 Cost of Goods Sold Finished Goods Work-in-Process 2,800,000 7,600,000
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