80.2K

Verified Solution

Link Copied!

Kidman & Associates is a law firm specializing in labor relations and employee-related work. It employs 20 professionals (2 partners and 18 associates) who work directly with its clients. Previously the firm accounted for all professional labor cost in a single direct-cost account and all other costs in a single indirect-cost pool. 23 Click the icon to view the cost information and rates under the previous method.) Kidman has just completed a review of its job-costing system. (Click the icon to view the job-costing review information.) Budgeted information for 2020 related to the two direct-cost categories is as follows: (Click the icon to view the budgeted information.) Read the requirements Data table The average budgeted total compensation per professional for 2020 is $115,000. Each professional is budgeted to have 1,250 billable hours to clients in 2020. All professionals work for clients to their maximum 1,250 billable hours available. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of Kidman & Associates other than professional labor costs are included in a single indirect-cost pool (legal support) and are allocated to jobs using professional labor-hours as the allocation base. The budgeted level of indirect costs in 2020 is $2,000,000. The cost estimates for the Richardson, Inc. job, which requires 80 budgeted hours of professional labor and for the Punch, Inc. job, which requires 135 budgeted hours of professional labor are as follows: $ CA Direct-costs Indirect costs Total costs Richardson 7,360 $ 6,400 Punch 12,420 10,800 13,760 $ 23,220 Print Done 1 Data table Professional Partner Labor Professional Associate Labor Number of professionals 2 18 Hours of billable time per professional 1,250 per year 1,250 per year Total compensation (average per professional) 250,000 $ 100,000 Budgeted information for 2020 relating to the two indirect-cost categories is as follows: General Support Secretarial Support Total costs 1,750,000 $ 250,000 Cost-allocation base Professional labor-hours Partner labor-hours Print Done - Requirements 1. Compute the 2020 budgeted direct-cost rates for (a) professional partners and (b) professional associates. 2. Compute the 2020 budgeted indirect-cost rates for (a) general support and (b) secretarial support 3. Compute the budgeted costs for the Richardson and Punch jobs, given the following information: Richardson, Inc. Punch, Inc. Professional partners 32 hours 27 hours Professional associates 48 hours 108 hours 4. Comment on the results in requirement 3. Why are the job costs different from those computed using the firm's previous method? 5. Would you recommend Kidman & Associates use the job-costing system in the previous method or the job-costing system in this problem? Explain. Print Done

Answer & Explanation Solved by verified expert

See Answer