Discuss the reasons a consulting firm might use a normal, Ask an Expert

Accounting

Hammond and Jarrett provide tax consulting for estates and trusts. Their job-costing system has a single direct-cost category (professional labour) 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 labour-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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Category:- Accounting Basics
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