Question 11.2: The public accounting firm in Numerical Example 11.1 awards ...
The public accounting firm in Numerical Example 11.1 awards bonus compensation to managers based on the audit manager’s ability to meet budgeted costs. The manager’s bonus is adjusted for the direct labor variance by adding or deducting 50 percent of the direct labor variances, excluding those related to managerial labor, to the performance bonus.
What is the manager’s bonus for the audit engagement?
The direct labor variance for senior and staff auditors is as follows:
| Type of Auditor | Actual Costs | Standard Costs | Direct Labor Variance |
| Senior | $836 | $800 | $36 |
| Staff | 1,320 | 1,200 | 120 |
| Totals | $2,624 | $2,500 | $156 Unfavorable |
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