& 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 indirect-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. Chirko & Partners employs 10 professionals to perform audit services. Budgeted and actual amounts for 2017 are as follows: Chirko & Partners Budget for 2017 Professional labor compensation $975,000 Audit support department costs $675,000 Professional labor-hours billed to clients 15,000 hours Actual results for 2017 Audit support department costs $775,000 Professional labor-hours billed to clients 15,500 hours Actual professional labor cost rate $54 per hour Compute the direct-cost rate and the indirect-cost rate per professional labor-hour for 2017 under each method. (a) Actual Costing Direct-cost rate $54 Indirect-cost rate $50 (b) Normal Costing $54 $45 (c) Variation of Normal Costing $65 $45 Compute the cost of the Pierre & Co. audit under each of the three methods. (a) Actual Costing (b) Normal Costing (c) Variation of Normal Costing Direct-Costs Indirect-Costs Total Job Costs

(a) Actual Costing

(b) Normal Costing

(c) Variation of Normal Costing

Direct-Costs

Indirect-Costs

Total Job Costs

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

& 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 indirect-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.

Chirko

& Partners employs 10 professionals to perform audit services. Budgeted and actual amounts for

2017

are as follows:

Chirko & Partners

Budget for 2017

Professional labor compensation

$975,000

Audit support department costs

$675,000

Professional labor-hours billed to clients

15,000

hours

Actual results for 2017

Audit support department costs

$775,000

Professional labor-hours billed to clients

15,500

hours

Actual professional labor cost rate

$54

per hour

Compute the direct-cost rate and the indirect-cost rate per professional labor-hour for

2017

under each method.

	(a)
	Actual
	Costing
Direct-cost rate	$54
Indirect-cost rate	$50

(b)

Normal

Costing

$54

$45

(c)

Variation of

Normal Costing

$65

$45

Compute the cost of the Pierre & Co. audit under each of the three methods.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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