and 5-31. He questions the use of a single cost rate for all professional labour ofWigan Partners. Wigan has two classifications of professional staff—partners and managers. Hanley asks his assistant to examine the relative use of partners and managers on the recent Widnes Coal and fit. Helen’s cases. The Widnes case used 24 partner-hours and 80 manager-hours.

The St. Helen’s case used 56 partner-hours and 40 manager-hours.

Hanley decides to examine how the use of separate direct- and indirect-cost pools for partners and managers would have affected the costs of the Widnes and St. Helen’s cases.

Indirect costs in each cost pool would be allocated based on total hours of that category of professional labour.

The rates per category of professional labour are as follows:

Category of Direct Cost Indirect Cost Professional Labour per Hour per Hour Partner $120.00 $69.00 Manager 60.00 24.00 These indirect-cost rates are based on a total indirect-cost pool of $8,400; $5,520 of this

$8,400 is attributable to the activities of partners, and $2,880 is attributable to the activities of managers. (The indirect cost per hour of $69 is calculated by dividing $5,520 by 80 partnerhours; the indirect-cost rate of $24 is calculated by dividing $2,880 by 120 manager-hours.)

Required 1. Present an overview diagram of the refined job-costing system with its multiple direct-cost 186 CHAPTER 5 categories and its multiple indirect-cost pools.

2. Compute the costs of the Widnes and St. Helen’s cases with Wigan Partners’ further refined system, with multiple direct-cost categories and multiple indirect-cost pools.
3. For what decisions might Wigan Partners find it more useful to use this job-costing approach rather than the approach in Problems