Normal Costing vs. Actual Costing Systems and One Pool vs. Multi-Pool Allocation
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Case
Hammond and Jarrett provide tax consulting for estates and trusts. Their job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (research support). The indirect-cost pool contains all the costs except direct personnel costs. All budgeted indirect costs are allocated to individual jobs using actual professional labor-hours.
Required:
a.Discuss the reasons a consulting firm might use a normal costing system rather than an actual costing system.
b.What might be some reasons for the firm to change from a one-pool to a multiple-pool allocation concept?
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Solution Summary
The solution contains the meaning of normal costing and actual costing, reasons for using normal costing and actual costing, meaning of costing pool, and circumstances which led to the use of multi-pool rather using one pool for costing allocation. This solution is 448 words.
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