Problem 2. (continuation of Problem 1)

Bob & Friends has just completed a review of its job-costing system. This review included a detailed analysis of how past jobs used the firms 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 labor and professional associate labor) and two indirect-cost categories (general support and secretarial support) would yield more accurate job costs. Budgeted information for 2021 related to the two direct-cost categories is as follows:

	Professional Partner Labor	Professional Associate Labor
Number of professionals	5	20
Hours of billable time per professional	1,400 per year	1,400 per year
Total compensation (average per professional)	$225,000	$80,000

Budgeted information for 2021 relating to the two indirect-cost categories is as follows:

	General Support	Secretarial Support
Total Costs	$1,925,000	$350,000
Cost-allocation base	Professional labor-hours	Partner labor-hours

Required:

1. Compute the 2021 budgeted direct-cost rates for (a) professional partners and (b) professional associates.

2. Compute the 2021 budgeted indirect-cost rates for (a) general support and (b) secretarial support.

3. Compute the budgeted costs for the Joe and Smith jobs, given the following information

	Joe, Inc	Smith, Inc
Professional partners	43	25
Professional associates	67	120

4. Comment on the results in requirement 3. Why are the job costs different from those computed in Problem 1?

5. Would you recommend Bob & Friends use the job-costing system in Problem 1 or the job-costing system in this problem? Explain briefly.