Chico & 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. Chico & Partners employs 10 professionals to perform audit services.

Budgeted and actual amounts for 2020 are as follows:

Required

1. Compute the direct-cost rate and the indirect-cost rate per professional labor-hour for 2020 under 

(a) Actual costing, 

(b) Normal costing, and 

(c) The variation of normal costing that uses budgeted rates for direct costs.
2. Which job-costing system would you recommend Chico & Partners use? Explain.
3. Chico’s 2020 audit of Pierre & Co. was budgeted to take 160 hours of professional labor time. The actual professional labor time spent on the audit was 180 hours. Compute the cost of the Pierre & Co. audit using 

(a) Actual costing, 

(b) Normal costing, and 

(c) The variation of normal costing that uses budgeted rates for direct costs. Explain any differences in the job cost.

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Home Insert A Page Layout Chico & Partners 1 2 Budget for 2020 3 Professional labor compensation 4 Audit support department costs 5 6 7 Actual results for 2020 8 Audit support department costs 9 Professional labor-hours billed to clients Professional labor-hours billed to clients 10 Actual professional labor cost rate Formulas B Data C $990,000 774,000 18,000 hours $735,000 17,500 hours $ 58 per hour