Frontier Partners, a management consulting firm, has the following condensed budget for 2017:

Frontier has a single direct-cost category (professional labor) and a single indirect-cost pool (client support). Indirect costs are allocated to jobs on the basis of professional labor costs.
Required
1. Prepare an overview diagram of the job-costing system. Calculate the 2017 budgeted indirect-cost rate for Frontier Partners.
2. The markup rate for pricing jobs is intended to produce operating income equal to 10% of revenues.
Calculate the markup rate as a percentage of professional labor costs.
3. Frontier is bidding on a consulting job for Sentinel Communications, a wireless communications company.
The budgeted breakdown of professional labor on the job is as follows:

Calculate the budgeted cost of the Sentinel Communications job. How much will Frontier bid for the job if it is to earn its target operating income of 10% of revenues?

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Revenues Total costs: $50,000,000 Direct costs Professional Labor Indirect costs $20,000,000 Client support 25,000,000 45,000,000 $5,000,000 Operating income Budgeted Rate per Hour S200 100 50 30 Professional Labor Category Director Partner Associate Assistant 24 100 220