Michel Scaramouche, the president of Tax-Assistance SA, is examining alternative ways to calculate indirect-cost rates. He collects the following information from the budget for the year:
• Budgeted variable indirect costs: €10 per hour of professional labour time
• Budgeted fixed indirect costs: €50,000 per quarter.
The budgeted billable professional labour-hours per quarter are:

Scaramouche pays all tax professionals employed by Tax-Assistance on an hourly basis (€30 per hour, including all fringe benefits).
Tax-Assistance’s job-costing system has a single direct-cost category (professional labour at €30 per hour) and a single indirect-cost pool (office support that is allocated using professional labour-hours).
Tax-Assistance charges clients €65 per professional labour-hour.

Required
1. Calculate 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. Calculate the operating profit for the following four customers using:
a. Quarterly-based indirect-cost rates
b. An annual indirect-cost rate:
• Jean-Baptiste Roquelin: 10 hours in February
• Violette Leduc: 6 hours in March and 4 hours in April
• Alphonse Dudet: 4 hours in June and 6 hours in August
• Francine Leclerc: 5 hours in January, 2 hours in September and 3 hours in November.

3. Comment on your results in requirement 2.

Transcribed Image Text:

January-March April-June July-September October-December 20 000 hours 10 000 hours 4 000 hours 6 000 hours