Job order costing: actual, normal, and variation from normal costing. Thanatos & Hades (T&H) is law firm that specializes in writing wills. Its job-costing system has one direct cost pool, professional labor and a single indirect cost pool that includes all supporting costs of running the law office. The support cost is allocated to clients on the basis of professional labor hours. In addition to the two senior partners, T&F have six associates who work directly with clients. Each of the eight lawyers is expected to work for approximately 2,500 hours a year

1. Compute the direct cost rate and the indirect cost rate per professional labor hour under

a. actual costing

b. normal costing

c. variation from normal costing that uses budgeted rates for direct costs.

2. The will for a rich tycoon, An Apostolus, was very complex and took four lawyers at the firm, 1,000 hours each to prepare. What would the cost of writing this will be under each of the costing methods in requirement 1?

Transcribed Image Text:

Budgeted and actual costs for 2008 were: Budgeted professional labor costs Budgeted support costs Actual professional labor costs Actual support costs Actual total professional hours $1,100,000 $2,000,000 $1,320,000 S2,400,000 22,000 hours