Keating& Associates is a law firm specializing in labor relations employee-related work. Keating & Associates received feedback from Punch, Inc., that its bid for the labor contract work was too high. This feedback prompted Keating to review its work activities and how they are reflected in its job-costing system. The review included the 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 2016 related to two direct cost categories is as follows: Professional Professional Partner labor Associate labor Number of professionals 5 20 Hours of billable time per professional 1,600 per year 1,600 per year Total compensation (Average per professional) $200,000 $80,000 Budgeted information for 2016 relating to two indirect cost categories is: General Secretarial Support Support Total cost $ 1,800,000 $ 400,000 Cost Allocation base Professional Partner Labor hours Labor hours Required: a. Compute the 2016 budgeted direct cost rates for (i) professional partners, and (ii) professional associates. b. Compute the 2016 budgeted indirect-cost rates for (i) general support, and (ii) secretarial support. c. Compute the budgeted job costs for the Richardson and Punch jobs, given the following information: Richardson, Inc. Punch, Inc. Professional Partners 60 hours 30 hours Professional associates 40 hours 120 hours
Keating& Associates is a law firm specializing in labor relations employee-related work. Keating & Associates received feedback from Punch, Inc., that its bid for the labor contract work was too high. This feedback prompted Keating to review its work activities and how they are reflected in its job-costing system. The review included the 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
Professional Professional
Partner labor Associate labor
| Number of professionals | 5 | 20 |
| Hours of billable time per professional | 1,600 per year | 1,600 per year |
| Total compensation (Average per professional) | $200,000 | $80,000 |
Budgeted information for 2016 relating to two indirect cost categories is:
General Secretarial Support Support
Total cost $ 1,800,000 $ 400,000
Cost Allocation base Professional Partner
Labor hours Labor hours
Required:
a. Compute the 2016 budgeted direct cost rates for (i) professional partners, and (ii) professional associates.
b. Compute the 2016 budgeted indirect-cost rates for (i) general support, and (ii) secretarial support.
c. Compute the budgeted job costs for the Richardson and Punch jobs, given the following information:
Richardson, Inc. Punch, Inc.
Professional Partners 60 hours 30 hours
Professional associates 40 hours 120 hours
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