1. Calculate the predetermined overhead rate to be used at Bairstow Consulting. Predetermined overhead rate = budgeted overhead / budgeted professional labour costs = $1,659,000 / $663,600 = 2.5 or 250% of professional labour costs 2. Calculate the cost of the three services. Robinsons labour cost = (50hr x $30) + (100hr x $75) + (15hr x $225) = $12,375 Overhead = $12,375 x 2.5 = $30,937.50 Total cost= $12,375 + $30,937.50 = $43,312.50 Smith & Son labour cost = (20 x 30) + (140 x 75) + (10 x 225) = $13,350 Overhead = $13,350 x 2.5 = $33,375 Total = $46,725 Snowman service labour cost = (70 x 30) + (80 x 75) + (20 x 225) = $12,600 Overhead = $12,600 x 2.5 = $31,500 Total = $44,100 3. How might the management of Bairstow Consulting use this information? 3 Management may use the cost information: (a) as a basis for setting fees (b) to assess the profitability of each service (C) to decide on promotion, refinement or withdrawal of services (d) to control costs. 4. How would Bairstow's approach differ if the firm used a billing rather than a costing system? 4 If Bairston Consulting was using a billing system for estimating its service costs, it would estimate the cost of each consulting job by accumulating the amounts that the client is to be charged for the service rather than by accumulating the costs of each job. The billing system would estimate the fees to be charged based on chargeout rates per billable hour for each separate labour type, such as IT trainees, graduates and senior consultants that has been consumed.in.proxiding the II.consulting services, rather than using one single predetermined overhead rate for the entire business to allocate overhead costs to services. 1. Calculate the predetermined overhead rate to be used at Bairstow Consulting. Predetermined overhead rate = budgeted overhead / budgeted professional labour costs = $1,659,000 / $663,600 = 2.5 or 250% of professional labour costs 2. Calculate the cost of the three services. Robinsons labour cost = (50hr x $30) + (100hr x $75) + (15hr x $225) = $12,375 Overhead = $12,375 x 2.5 = $30,937.50 Total cost= $12,375 + $30,937.50 = $43,312.50 Smith & Son labour cost = (20 x 30) + (140 x 75) + (10 x 225) = $13,350 Overhead = $13,350 x 2.5 = $33,375 Total = $46,725 Snowman service labour cost = (70 x 30) + (80 x 75) + (20 x 225) = $12,600 Overhead = $12,600 x 2.5 = $31,500 Total = $44,100 3. How might the management of Bairstow Consulting use this information? 3 Management may use the cost information: (a) as a basis for setting fees (b) to assess the profitability of each service (C) to decide on promotion, refinement or withdrawal of services (d) to control costs. 4. How would Bairstow's approach differ if the firm used a billing rather than a costing system? 4 If Bairston Consulting was using a billing system for estimating its service costs, it would estimate the cost of each consulting job by accumulating the amounts that the client is to be charged for the service rather than by accumulating the costs of each job. The billing system would estimate the fees to be charged based on chargeout rates per billable hour for each separate labour type, such as IT trainees, graduates and senior consultants that has been consumed.in.proxiding the II.consulting services, rather than using one single predetermined overhead rate for the entire business to allocate overhead costs to services