QUESTION - ABC & Associates is a public accounting firm that specialises in providing accounting and auditing service. 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 office. The support costs are allocated to clients on the basis of professional labour-hours. In addition to the two senior partners, ABC has six partners who work directly with clients. Each of the eight partners is expected to work for approximately 2 650 hours a year. Budgeted and actual costs for 2016 were:
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Budgeted professional labour costs
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$4,240,000
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Budgeted support costs
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$2,000,000
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Actual professional labour costs
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$4,893,000
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Actual support costs
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$2,400,000
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Actual total professional hours
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23,300 hours
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Required: Calculate the indirect costs rate per professional labour-hour under:
(a) Actual costing
(b) Normal costing