MANAGERIAL ACCOUNTING – SEMINAR ASSIGNMENTS

Ing. Lenka Strýčková, Ph.D.

V. Job Costing
1. Computing indirect cost rates, job costing

Michael Scaramouche, the president of Tax Assistance SA, is examining alternative ways to calculate
indirect-cost rates. He collects the following information from the budget for the year:
● Budgeted variable indirect costs: €10 per hour of professional labour time
● Budgeted fixed indirect costs: €50 000 per quarter
The budgeted billable professional labour-hours per quarter are:

January - March 20 000 hours

April – June 10 000 hours
July - September 4 000 hours
October – December 6 000 hours

Scaramouche pays all tax professionals employed by Tax-Assistance on an hourly basis (€30 per hour,
including all fringe benefits).
Tax-Assistance’s job-costing system has a single direct-cost category (professional labour at €30 per
hour) and a single indirect-cost pool (office support that is allocated using professional labour-hours).
Tax-Assistance charges clients €65 per professional labour-hour.
• Jean-Baptiste Roquelin: 10 hours in February
• Violette Leduc: 6 hours in March and 4 hours in April
• Alphonse Dudet: 4 hours in June and 6 hours in August
• Francine Leclerc: 5 hours in January, 2 hours in September and 3
hours in November

Questions:
1) Calculate budgeted indirect-cost rates per professional labour-hour using:
a) Quarterly budgeted billable hours as the denominator.
b) Annual budgeted billable hours as the denominator.
2) Calculate the operating profit for the following four customers using:
a) Quaterly-based indirect-cost rates
b) An annual indirect-cost rate.

V. Job Costing
 MANAGERIAL ACCOUNTING – SEMINAR ASSIGNMENTS
Ing. Lenka Strýčková, Ph.D.

2. Computing direct-cost rates, consulting firm

Zimmermann GmbH is an international consulting firm. Its annual budget includes the following for
each category of professional labour:

Category Average Average Billable Vacation and Professional Unbilled time

salary (€) fringe time for sick leave development due to lack of
benefits clients (hours) (hours) demand
(€) (hours)
Director 140 000 60 000 1 600 160 240 0
Partner 105 000 45 000 1 600 160 240 0
Associate 60 000 20 000 1 600 160 240 0
Assistant 38 000 12 000 1 600 160 240 0

Questions:
1) Calculate the budgeted direct-cost rate for professional labour (salary and fringe benefits)
per hour for (a) directors, (b) partners, (c) associates, and (d) assistants. Use budgeted
billable time for clients as the denominator in these computations.
2) Repeat requirement 1. Use the sum of budgeted billable time, vacation and sick leave time
and professional development time as the denominator in these calculations.
3) Why are the rates different between requirements 1 and 2? How might these differences
affect job costing by Zimmermann GmbH?

V. Job Costing
 MANAGERIAL ACCOUNTING – SEMINAR ASSIGNMENTS
Ing. Lenka Strýčková, Ph.D.

3. Accounting for manufacturing overhead

Consider the following selected cost data for Schwarzmetal GmbH for 2019.

Budgeted manufacturing overhead €7 000 000

Budgeted machine-hours 200 000
Actual manufacturing overhead €6 800 000
Actual machine-hours 195 000

Schwarzmetal’s job-costing system has a single manufacturing overhead cost pool (allocated using a
budgeted rate based on actual machine-hours). Any amount of under- or overallocation is
immediately written off to Cost of Goods Sold.
Questions:
1) Calculate the budgeted manufacturing overhead rate.
2) Calculate the amount of under- or overallocation of manufacturing overhead. Is the amount
significant? Journalise the disposition of this amount on the basis of the closing balances in
the relevant accounts.

V. Job Costing