Computing indirect cost rates, job costing. Mike Rotundo, the president of Tax Assist, is examining alternative ways to compute indirect cost rates. He collects the following informa¬
tion from the budget for 2008:
Budgeted variable indirect costs: $12 per hour of professional labour time Budgeted fixed indirect costs: $60,000 per quarter The budgeted billable professional labour-hours per quarter are:
January-March April-June July-September October-December 24,000 hours 12,000 hours 4,800 hours 7,200 hours Rotundo pays all tax professionals employed by Tax Assist on an hourly basis ($36 per hour, including all fringe benefits).
Tax Assist’s job-costing system has a single direct-cost category (professional labour at $36 per hour) and a single indirect-cost pool (office support that is allocated using profes¬
sional labour-hours).
Tax Assist charges clients $78 per professional labour-hour.
Required 1. Compute budgeted indirect cost rates per professional labour-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 in February Lelani Kai: 6 hours in March and 4 hours in April Ken Patera: 4 hours in June and 6 hours in August Evelyn Stevens: 5 hours inJanuary, 2 hours in September, and 3 hours in November 3. Comment on your results in requirement 2.