Reference no: EM131663765

Question: Job costing; actual, normal, and variation from normal costing. Cheney & Partners, a Quebecbased 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.

Budgeted and actual amounts for 2017 are as follows:

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 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.