Job costing; actual, normal, and variation from normal costing. Cheney & Partners, a Quebec based public accounting partnership, specializes in audit services. Its job-costing system

Job costing; actual, normal, and variation from normal costing. Cheney & 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. Cheney & Partners employs 10 professionals to perform audit services. : Home
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Page Layout
Formulas
Data
A
B
Cheney & Partners
2 Budget for 2017
3 Professional labor compensation
4 Audit support department costs
5 Professional labor-hours billed to clients
$960,000
720,000
16,000 hours
7 Actual results for 2017
8 Audit support department costs
9 Professional labor-hours billed to clients
10 Actual professional labor cost rate
$744,000
15,500 hours
53 per 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.
Required
2. Which job-costing system would you recommend Cheney & Partners use? Explain.
3. Cheney’s 2017 audit of Pierre & Co. was budgeted to take 170 hours of professional labor time. The
actual professional labor time spent on the audit was 185 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.