Problem 4 (7 marks)

Getta Geek Ltd offers a range of IT consulting services. The companys service costing system estimates the cost of each consulting job by accumulating costs of the professional labour that works on the job plus a charge for overhead.

The cost of professional labour is charged to jobs using the following three rates:

The predetermined overhead rate is based on professional labour costs, which are budgeted to be $442 400 for the current year. The estimated overheard costs for the current year as budgeted to be:

During the month of May the company provided three services, which consumed the following quantities of professional labour (in hours):

Required:

1.Calculate the predetermined overhead rate to be used at Getta Geek (1 mark)

2. Calculate the cost of the three services (4 marks)

3.How might the management of Getta Geek use this information? (1 mark)

4.How would Getta Geeks approach differ if the firm used a billing rather than a costing system? (1 mark)