Question: Job costing, consulting firm. Frontier Partners, a management consulting firm, has the following condensed budget for 2017:
Frontier has a single direct-cost category (professional labor) and a single indirect-cost pool (client support). Indirect costs are allocated to jobs on the basis of professional labor costs.
1. Prepare an overview diagram of the job-costing system. Calculate the 2017 budgeted indirect-cost rate for Frontier Partners.
2. 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.
3. Frontier is bidding on a consulting job for Sentinel Communications, a wireless communications company. The budgeted breakdown of professional labor on the job is as follows:
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?