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JPB Group

JPB Group is a consulting firm specializing in mergers and acquisitions. In addition to the three partners, the firm employs nine consultants who work directly with clients. The average budgeted compensation for the twelve professionals is $130,000. Each consultant is budgeted at 1,600 billable hours per year. All professional labor costs are included in a single direct cost pool and are traced to jobs on a per hour basis. All non-professional labor costs are included in a single overhead cost pool and are allocated to jobs using professional labor hours as the allocation base. Budgeted overhead costs total $1,200,000. During the period the firm worked on the following jobs:

(a) The Stephens-Moore Account: Consultants booked 100 hours
(b) The Porter Keadle account: Consultants booked 175 hours.

(1) Compute the budgeted direct cost rate per hour of professional labor.
(2) Compute the budgeted overhead cost rate per hour of professional labor.
(3) Compute the cost assigned to each job.
(4) Compute the fee to be charged to each client assuming the company uses a cost plus pricing approach and marks up cost by 20%.

Solution Preview

(a) The Stephens-Moore Account: Consultants booked 100 hours
(b) The Porter Keadle account: Consultants booked 175 hours.

(1) Compute the budgeted direct cost rate per hour of professional labor.
1,600 hours per year x 12 consultants = 19,200 hours
Budgeted direct cost rate per ...

Solution Summary

This solution is comprised of a detailed explanation to compute the budgeted direct cost rate per hour of professional labor, the budgeted overhead cost rate per hour of professional labor, the cost assigned to each job, and the fee to be charged to each client assuming the company uses a cost plus pricing approach and marks up cost by 20%.

$2.19