Computing indirect cost rates, job costing. Mike Rorundo, the president of Tax Assist, is examining alternative wavs to compute indirect cost rates. He collects the following information from the budget for 195:

♦ Budgeted variable indirect costs: S10 per hour of professional labor time

♦ Budgeted fixed indirect costs: 550,000 per month The budgeted billable professional labor-hours per quarter are:

January-March April-June July-September October-December 20,000 hours 10,000 hours 4,000 hours 6,000 hours Rorundo pays all tax professionals employed by Tax Assist on an hourly basis ($30 per hour, including all fringe benefits).

Tax Assist's job costing system has a single direct cost category (professional labor at $30 per hour) and a single indirect cost pool (office support that is allocated using profession- al labor-hours).

Tax Assist charges clients S65 per professional labor-hour.

Required 1. Compute the budgeted indirect cost rates per professional labor-hour using:

a. quarterly budgeted billable hours as the denominator

b. annual budgeted billable hours as the denominator 2. Compute the operating income for the following four customers using:

a. quarterly-based indirect cost rates

b. an annual indirect cost rate

♦ Stan Hansen: 10 hours work in February

♦ Lelani Kai: 6 hours work in March and 4 hours in April

♦ Ken Patera: 4 hours in June and 6 hours in August

♦ Evelyn Stevens: 5 hours in Januarv, 2 hours in September, and 3 hours in November 3. Comment on the results in requirement 2.