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Timlin Associates is a recently formed law partnership. Rachel Hamilton, the managing partner of Timlin Associates, has just finished a tense phone call with Phil Lopez, president of Lopez Enterprises. Phil strongly complained about the price Timlin charged for some legal work done for his company.

Hamilton also received a phone call from Timlin$$s only other client, Clinical Inc., which was very pleased with both the quality of the work and the price charged on its most recent job.

Timlin Associates operates at capacity and uses a cost$-$based approach to pricing $($billing$)$ each job. Currently it uses a simple costing system with a single direct$-$cost category $($professional labor$-$hours$)$ and a single indirect$-$cost pool $($general support$).$ Indirect costs are allocated to cases on the basis of professional labor$-$hours per case. The job files show the following:

Professional labor costs at Timlin Associates are $$250$ an hour. Indirect costs are allocated to cases at $$125$ an hour. Total indirect costs in the most recent period were $$625,000.$

Required$1.$ Why is it important for Timlin Associates to understand the costs associated with individual jobs?$2.$ Compute the costs of the Lopez Enterprises and Clinical Inc. jobs using Timlin$$s simple costing system.

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