Chirac & Partners, a Quebec-based public accounting partnership, specializes in audit services. Its job-costing system has a
Question:
Chirac & 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 in direct-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. Chirac & Partners employs 10 professionals to perform audit services. Budgeted and actual
amounts for 2017 are asfollows:
Chirac & Partners
Budget for 2017
Professional labor compensation $990,000
Audit support department costs $774,000
Professional labor-hours billed to clients 18,000 hours
Actual results for 2017
Audit support department costs $735,000
Professional labor-hours billed to clients 17,500 hours
Actual professional labor cost rate $56 per hour
- Compute thedirect-cost rate and theindirect-cost rate per professionallabor-hour for 2017 under(a) actualcosting, (b) normalcosting, and(c) the variation from normal costing that uses budgeted rates for direct costs.
- Whichjob-costing system would you recommend Chirac & Partnersuse? Explain.
- Chirac 2017 audit of Pierre& Co. was budgeted to take 140 hours of professional labor time. The actual professional labor time spent on the audit was 155 hours. Compute the cost of the Pierre& Co. audit using(a) actualcosting, (b) normalcosting, and(c) the variation from normal costing that uses budgeted rates for direct costs. Explain any differences in the job cost.
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 978-0134475585
16th edition
Authors: Srikant M. Datar, Madhav V. Rajan