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4-26 Job costing, consulting firm. Frontier Partners, a management consulting firm, has the following condensed budget for 2017: $50,000,000 Revenues Total costs: Direct costs Indirect
4-26 Job costing, consulting firm. Frontier Partners, a management consulting firm, has the following condensed budget for 2017: $50,000,000 Revenues Total costs: Direct costs Indirect costs Operating income Professional Labor $ 20,000,000 45,000,000 $5,000,000 Client support 25,000,000 Frontier has a single direct-cost category (professional labor) and a single indirect-cost pool (client sup- port). Indirect costs are allocated to jobs on the basis of professional labor costs. 142 CHAPTER 4 JOB COSTING 1. 2. 3. Prepare an overview diagram of the job-costing system. Calculate the 2017 budgeted indirect-cost rate for Frontier Partners. The markup rate for pricing jobs is intended to produce operating income equal to 10% of revenues. Calculate the markup rate as a percentage of professional labor costs. Frontier is bidding on a consulting job for Sentinel Communications, a wireless communications com- pany. The budgeted breakdown of professional labor on the job is as follows: Required Professional Labor Category Director Partner Associate Assistant Budgeted Rate per Hour $200 100 50 30 Budgeted Hours 24 100 220 Calculate the budgeted cost of the Sentinel Communications job. How much will Frontier bid for the job if it is to earn its target operating income of 10% of revenues
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