Budgeted and Actual Amounts for 2001 Are As Follows

PROBLEM 3-2A______

Chirac & Partners is a France-based public accounting partnership specialising in audit services. Its job-costing system has a single direct-cost category (professional labour) and a single indirect-cost pool (audit support, which contains all the costs in the Audit Support Department). Audit support costs are allocated to individual jobs using actual professional hours-hours. Chirac & Partners employs ten professionals who are involved in their auditing services.

Budgeted and actual amounts for 2001 are as follows:

Budget for 2001

Professional labour compensation £960,000

Audit Support Department costs £720,000

Professional hours-hours billed to clients 16,000 hours

Actual Results for 2001

Audit Support Department costs £744,000

Professional hours-hours billed to clients 15,500 hours

Actual professional labour cost rate £58 per hour

Required:

1. Compute the direct-cost rate per professional hour-hour and the indirect-cost rate per professional hour-hour for 2001 under (a) actual costing, (b) normal costing, and (c) variation of normal costing that uses budgeted rates for direct costs.

2. The audit of the French Expos, done in 2001, was budgeted to take 110 hours of professional labour time. The actual professional labour time on the audit was 120 hours. Compute the 2001 job cost using (a) actual costing, (b) normal costing, and (c) variation of normal costing that uses budgeted rates for direct costs. Explain any differences.

Instructions:

1. Review the printed template called Problem 3-1 that follows these instructions. Most of the problem data have been entered for you in the data input section of the spreadsheet.

2. There are 12 FORMULAS in the template that you need to provide to complete your analysis. Using the spaces provided, write the formulas where requested in the template.

FORMULA 1 ______FORMULA 4 ______

FORMULA 2 ______FORMULA 5 ______

FORMULA 3 ______FORMULA 6 ______

PROBLEM 3-2A

Continued

FORMULA 7 ______FORMULA 10 ______

FORMULA 8 ______FORMULA 11 ______

FORMULA 9 ______FORMULA 12 ______

3. Click the Lotus or Excel icon from the program manager screen to start the spreadsheet program. Click on the Open File SmartIcon/Button to retrieve the template for the problem. Then enter the 12 FORMULAS where indicated on the template.

Type the answer to Part 2 where indicated.

4. Click the Save File SmartIcon/Button to save your work.

5. Click the Print SmartIcon to display the Print dialog box. Click the OK button to print your work.

For Excel users, click the Print Button to print your work.