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AAC has just completed a review of its job order costing system. This review included a detailed analysis of how past jobs used the company's
AAC has just completed a review of its job order costing system. This review included a detailed analysis of how past jobs used the company's resources and interviews with personnel about the factors that drive the level of indirect costs. The management concluded that a system with two direct-cost categories (professional partner labor and professional associate labor) and two indirect-cost categories (general support and secretarial support) would yield more accurate job costs. Budgeted information for 2019 related to the two direct-cost categories or pools is as follows: Professional Partner Labor 5 1,500 per year RM210,000 Professional Associate Labor 25 1,500 per year RM75,000 Number of professionals Hours of billable time per professional Total compensation (average per professional) Budgeted information for 2019 relating to the two indirect-cost categories is as follows: General Support RM2,025,000 Professional labor-hours Secretarial Support RM450,000 Partner labor-hours Total costs Coat-allocation base (1) Determine the 2019 budgeted direct-cost rates for professional partners and professional associates. Show all workings. (ii) Determine the 2019 budgeted indirect-cost rates for general support and secretarial support. Show all workings. (iii) Given the following information, determine the budgeted costs for the Raya and Perkasa jobs. Show all workings: Perkasa Professional partners Professional associates Raya 48 hours 72 hours 32 hours 128 hours (iv) Discuss on the results in requirement (d)(iii) and (c) above by showing the differences in the costs used by both Raya and Perkasa jobs. Give TWO (2) reasons for the differences. Show all workings. (v) Would you recommend AAC to use the existing job order costing system prior to the review process or the one after the review process? Give TWO (2) reasons to support your recommendation
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