E6.27 LO 6.7 6.8 Job costing and billing: IT consulting firm Bairstow Consulting Ltd offers a range of IT consulting services. The company's service costing system estimates the cost of each consulting job by accumulating costs of the professional labour that works on the job plus a charge for overhead. The cost of professional labour is charged to jobs using the following three rates: IT trainee IT graduate IT senior consultant $30 per hour $75 per hour $225 per hour The predetermined overhead rate is based on professional labour costs, which are budgeted to be $663 600 for the current year. The estimated overhead costs for the current year are budgeted to be: Management salaries $735000 Salaries of clerical and reception staff 285000 Depreciation on IT hardware and software 240000 Stationery 22500 Telecommunications 31.500 Insurance 180000 Depreciation on office fixtures and fittings 11250 Rent 90750 Electricity 39525 Council rates 23475 During June the company provided three services, which consumed the following quantities of professional labour (in hours): Client Robinsons Smith and Son Snowman Services Required IT trainee IT graduate Senior consultant 50 100 15 20 140 10 70 80 20 1. Calculate the predetermined overhead rate to be used at Bairstow Consulting. 2. Calculate the cost of the three services. 3. How might the management of Bairstow Consulting use this information? 4. How would Bairstow's approach differ if the firm used a billing rather than a costing system?