The classification and normal balance of the drawing account is ...

[wenmo]

The classification and normal balance of the drawing account is
 a. an expense with a credit balance
  b. an expense with a debit balance
  c. a liability with a credit balance
  d. owner's equity with a debit balance

Question 2

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?

[emsimon14]

Answer to Question 1

d

Answer to Question 2

Answer:
a. Budget rates are normally used because actual costs may not be available until some time after a job is completed. Decisions about billing a client for services rendered generally must be made immediately after the job is completed. Also, actual costs may reflect short-run changes in the environment that may distort the billing process. Budgeted costs are affected by weekly or monthly fluctuations and, therefore, offer a stable comparison and assignment of costs throughout the accounting cycle.
b. Having separate professional labor-hour rates assists in assigning the personnel costs to jobs closest to their real values. This helps to maintain different costs for jobs that have the same number of hours but a different mix of professionals doing the job. Seldom is there only one cause-and-effect relationship between a job and the tasks performed on the job; therefore, it may also be a good idea to develop multiple indirect-cost assignments (i.e., one for staff support and others for such items as computer support or general administrative support).

[wenmo]

Correct answers!

[emsimon14]

Great! Please up vote