# Although not required the following overview diagram

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Although not required, the following overview diagram summarizes Chirac’s job-costing system. Audit Support Professional Labor-Hours Indirect Costs Direct Costs INDIRECT COST POOL COST ALLOCATION BASE COST OBJECT: JOB FOR AUDITING PIERRE & CO. DIRECT COST Professional Labor
4-23 4-29 4-29 4-29 (30 min.) Job Job Job order order order costing: costing: costing: actual, actual, actual, normal, normal, normal, and and and variation variation variation from from from normal normal normal costing. costing. costing. 1a. Actual costing Direct cost rate = Actual professional labor costs ÷ Actual professional labor-hours = \$1,320,000 ÷ 22,000 hours = \$60 per professional-hour Indirect cost rate = Actual support costs ÷ Actual professional labor-hours = \$2,400,000 ÷ 22,000 hours = \$109.09 per professional-hour 1b. Normal costing Budgeted professional hours = Budgeted hours per lawyer Number of lawyers = 2500 8 = 20,000 hours Direct cost rate = Actual professional labor costs ÷ Actual professional labor-hours = \$1,320,000 ÷ 22,000 hours = \$60 per professional-hour Indirect cost rate = Budgeted support costs ÷ Budgeted professional labor-hours = \$2,000,000 ÷ 20,000 hours = \$100 per professional-hour 1c. Variation from normal costing that uses budgeted rates for direct costs Direct cost rate Budgeted professional labor costs Budgeted professional labor-hours = \$1,100,000 ÷ 20,000 hours = \$55 per professional-hour Indirect cost rate = Budgeted support costs ÷ Budgeted professional labor-hours = \$2,000,000 ÷ 20,000 hours = \$100 per professional-hour 2. The costs of Ari Apostolus’ will under each method follow: a. Actual Costing Direct costs 4,000 hours \$60 per hour \$240,000 Indirect costs 4,000 hours \$109.09 per hour 436,360 Total costs \$676,360 b. Normal Costing Direct costs 4,000 hours \$60 per hour \$240,000 Indirect costs 4,000 hours \$100 per hour 400,000 Total costs \$640,000 c. Variation from normal costing Direct costs 4,000 hours \$55 per hour \$220,000 Indirect costs 4,000 hours \$100 per hour 400,000 Total costs \$620,000