Taylor & Associates, a consulting firm, has the following condensed budget for 2012:

Revenues ...........................................$ 20,000,000

Total costs:

Direct costs Professional labor......... $ 5,000,000

Indirect costs

Client support..... 13,000,000 .............18,000,000

Operating income ..............................$ 2,000,000

Taylor has a single direct- cost category (professional labor) and a single indirect- cost pool (client support). Indirect costs are allocated to jobs on the basis of professional labor costs.

1. Prepare an overview diagram of the job- costing system. Calculate the 2012 budgeted indirect- cost rate for Taylor & Associates.

2. The markup rate for pricing jobs is intended to produce operating income equal to 10% of revenues. Calculate the markup rate as a percentage of professional labor costs.

3. Taylor is bidding on a consulting job for Tasty Chicken, a fast- food chain specializing in poultry meats. The budgeted breakdown of professional labor on the job is as follows:

Calculate the budgeted cost of the Tasty Chicken job. How much will Taylor bid for the job if it is to earn its target operating income of 10% of revenues?

Transcribed Image Text:

Professional Labor Category Budgeted Rate per Hour $200 100 50 30 Budgeted Hours Director Partner Associate Assistant 16 40 160