Global Enterprize, a management consulting firm, has the following condensed budget for 2017:

Global Enterprize has a single direct-cost category (professional labor) and a single indirect-cost pool (client support). Indirect costs are allocated to jobs on the basis of professional labor costs.

1. Prepare an overview diagram of the job-costing system. Calculate the 2017 budgeted indirect-cost rate for Global Enterprize.
2. The markup rate for pricing jobs is intended to produce operating income equal to 11.50% of revenues.
Calculate the markup rate as a percentage of professional labor costs.
3. Global Enterprize is bidding on a consulting job for Horizon Telecommunications, a wireless communications company. The budgeted breakdown of professional labor on the job is as follows:

Calculate the budgeted cost of the Horizon Telecommunications job. How much will Global Enterprize bid for the job if it is to earn its target operating income of 11.50% of revenues?

Transcribed Image Text:

Revenues Total costs: Direct costs Professional Labor $15,000,000 Indirect costs Client support 22,170,000 Operating income $42,000,000 37,170,000 $ 4,830,000