Chirko & 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:Budget for 2017 Professional labor compensation$975,000 Audit support department costs$675,000 Professional labor-hours billed to clients15,000hours Actual results for 2017 Audit support department costs$775,000 Professional labor-hours billed to clients15,500 hours Actual professional labor cost rate$54per hour 1.Compute the direct-cost rate and the indirect-cost rate per professional labor-hour for 2017 under (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs.2.Which job-costing system would you recommend Chirko& Partners use? Explain.3.Chirko's2017audit of Pierre & Co. was budgeted to take 150 hours of professional labor time. The actual professional labor time spent on the audit was 160hours. Compute the cost of the Pierre & Co. audit using (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs. Explain any differences in the job cost.

1. Actual direct cost rate for professional labor = 54 per professional labor-hour Actual indirect…

Answered: e Audit Support Department). Audit…

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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Chirko & 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:

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 (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs.

Which job-costing system would you recommend Chirko
& Partners use? Explain.

Chirko's

2017

audit of Pierre & Co. was budgeted to take 150 hours of professional labor time. The actual professional labor time spent on the audit was 160
hours. Compute the cost of the Pierre & Co. audit using (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs. Explain any differences in the job cost.

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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