Manatos&Gades (MG) is a law firm that specializes in writing wills. Its job-costing system has one direct cost pool, professional labour, and a single indirect cost pool that includes all supporting costs of running the law office. The support costs are allocated to clients on the basis of professional labour-hours. In addition to the two senior partners at MG, there are

six associates who work directly with clients. Each of the eight lawyers is expected to work for approximately 2,500 hours a year. Budgeted and actual costs for the year were as follows:

Required

1.	Compute the direct cost rate and the indirect cost rate per professional labour-hour under
	a.	Actual costing
	b.	Normal costing
	c.	Budgeted costing
2.	The will for a rich tycoon, Ari Roos, was very complex and took three lawyers at the firm 1,000 hours each to prepare. What would be the cost of writing this will under each of the costing methods in requirement 1?

Budgeted actual costs

Budgeted professional labour costs	$1,200,000
Budgeted support costs	$2,500,000
Actual professional labour costs	$1,311,000
Actual support costs	$2,300,000
Actual total professional hours	23,000	hours

Requirement 1. Compute the direct cost rate and the indirect cost rate per professional labour-hour under the following.

a. Actual costing

b. Normal costing

c. Budgeted costing

Begin by completing the formula to calculate the actual direct cost rate.

Actual direct cost rate

=

Complete the formula to calculate the actual indirect cost rate.

Actual indirect cost rate

=

Complete the formula to calculate the budgeted indirect cost rate.

Budgeted indirect cost rate

=

Complete the formula to calculate the budgeted direct cost rate.

Budgeted direct cost rate

=

Compute the direct cost rate and the indirect cost rate per professional labour-hour under the following. (Round your answers to the nearest cent.)

	(a) Actual costing	(b) Normal costing	(c) Budgeted costing
Direct cost rate
Indirect cost rate

Requirement 2. The will for a rich tycoon, Ari Roos, was very complex and took

three

lawyers at the firm

1,000

hours each to prepare. What would be the cost of writing this will under each of the costing methods in requirement 1?

Begin by completing the formulas to calculate the direct and indirect costs under actual costing. (Abbreviation used: qty = quantity.)

(a) Actual costing:
Direct costs	=
Indirect costs	=

Complete the formulas to calculate the direct and indirect costs under normal costing. (Abbreviation used: qty = quantity.)

(b) Normal costing:
Direct costs	=
Indirect costs	=

Complete the formulas to calculate the direct and indirect costs under budgeted costing. (Abbreviation used: qty = quantity.)

(c) Budgeted costing:
Direct costs	=
Indirect costs	=

What would the cost of writing this will be under each of the costing methods in requirement 1? (Round your answer the nearest whole dollar.)

Cost of Roos' will:	(a) Actual costing	(b) Normal costing	(c) Budgeted costing
Direct costs
Indirect costs
Total job costs