Keaton & 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. The average budgeted total compensation per professional for 2017 is $115,000. Each professional is budgeted to have 1,250 billable hours to clients in 2017. 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 Keaton & 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 2017 is $2,000,000.
Keaton & 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. The average budgeted total compensation per professional for 2017 is $115,000. Each professional is budgeted to have 1,250 billable hours to clients in 2017. 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 Keaton & 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 2017 is $2,000,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Keaton & 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. The average budgeted total compensation per professional for 2017 is $115,000. Each professional is budgeted to have 1,250 billable hours to clients in 2017. All professionals work for clients to their maximum 1,250 billable hours available. Allprofessional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of Keaton & 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
2017 is $2,000,000.
Read the requirements1.
Requirement 1. Identify the components of the overview diagram of
job-costing system.
Keaton's
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Requirement 2. Compute the
2017
budgeted direct-cost rate per hour of professional labor.Select the formula to compute the budgeted direct-cost rate, then enter the amounts and calculate the rate.
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Budgeted direct-
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(10)
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/
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(11)
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=
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cost rate per hour
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/
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=
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per hour
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Requirement 3. Compute the
2017
budgeted indirect-cost rate per hour of professional labor. Select the formula to compute the budgeted indirect-cost rate, then enter the amounts and calculate the rate.|
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Budgeted indirect-
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(12)
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(13)
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=
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cost rate per hour
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=
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per hour
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Requirement 4. Prepare a cost estimate for the Richardson, Inc. job, which requires
80
budgeted hours of professional labor and for the Punch, Inc. job, which requires
105
budgeted hours of professional labor.|
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Richardson
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Direct-costs
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Indirect-costs
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Total costs
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Punch
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1: Requirements
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1.
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Identify the components of the overview diagram of
Keaton's
job-costing system. |
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|
2.
|
Compute the
2017
budgeted direct-cost rate per hour of professional labor. |
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3.
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Compute the
2017
budgeted indirect-cost rate per hour of professional labor. |
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4.
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Keaton
& Associates is considering bidding on two jobs: |
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a.
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Litigation work for Richardson, Inc., which requires
80
budgeted hours of professional labor. |
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b.
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Labor contract work for Punch, Inc., which requires
105
budgeted hours of professional labor. Prepare a cost estimate for each job. |
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