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 2016 related to the two direct cost categories is as follows:

Professional Professional

Partner LabourManager Labour

Number of professionals.........................................5...........................20

Hours of billable time per professional...........1,600 per year.............1,600 per year

Total compensation (average per professional)......$200,000.....................$80,000

Budgeted information for 2016 relating to the two indirect cost categories is

General SupportAdministration Support

Total costs...................................$1,800,000......................$400,000

Cost allocation base.......Professional labour-hours........Partner labour-hours

Required

1. Compute the 2016 budgeted direct cost rates for (a) professional partners and (b) professional managers.

2. Compute the 2016 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:

Richardson Inc.Punch Inc.

Professional partners........................60 hours........................30 hours

Professional managers.......................40 hours......................120 hours

4. Comment on the results in requirement 3. Why are the job costs different from those computed in Problem 4-34?