Chapter 4, Problem 4.38P

Service industry, job costing, two direct- and two indirect-cost categories, law firm (continuation of 4-37). Kidman has just completed a review of its job-costing system. This review included a detailed analysis of how past jobs used the firm’s resources and interviews with personnel about what factors drive the level of indirect costs. Management concluded that a system with two direct-cost categories (professional partner labor and professional associate labor) and two indirect-cost categories (general support and secretarial support) would yield more accurate job costs. Budgeted information for 2017 related to the two direct-cost categories is as follows:

	Professional Partner Labor	Professional Associate Labor
Number of professionals	5	25
Hours of billable time per professional	1,500 per year	1,500 per year
Total compensation (average per professional)	$210,000	$75,000

Budgeted information for 2017 relating to the two indirect-cost categories is as follows:

	General Support	Secretarial Support
Total costs	$2,025,000	$450,000
Cost-allocation base	Professional labor-hours	Partner labor-hours

1. 1. Compute the 2017 budgeted direct-cost rates for (a) professional partners and (b) professional associates.

  Required

1. 2. Compute the 2017 budgeted indirect-cost rates for (a) general support and (b) secretarial support.
2. 3. Compute the budgeted costs for the Richardson and Punch jobs_; given the following information:

	Richardson, Inc.	Punch, Inc.
Professional partners	48 hours	32 hours
Professional associates	72 hours	128 hours

1. 4. Comment on the results in requirement 3. Why are the job costs different from those computed in Problem 4-37?
2. 5. Would you recommend Kidman & Associates use the job-costing system in Problem 4-37 or the job-costing system in this problem? Explain.