Chapter 4, Problem 4.37P

Service industry, job costing, law firm. Kidman & Associates is a law firm specializing in labor relations and employee-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. The average budgeted total compensation per professional for 2017 is $97,500. Each professional is budgeted to have 1,500 billable hours to clients in 2017. All professionals work for clients to their maximum 1,500 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 2017 is $2,475,000.

1. 1. Prepare an overview diagram of Kidman’s job-costing system.

  Required

1. 2. Compute the 2017 budgeted direct-cost rate per hour of professional labor.
2. 3. Compute the 2017 budgeted indirect-cost rate per hour of professional labor.
3. 4. Kidman & Associates is considering bidding on two jobs:
4. a. Litigation work for Richardson. Inc., which requires 120 budgeted hours of professional labor
5. b. Labor contract work for Punch, Inc., which requires 160 budgeted hours of professional labor. Prepare a cost estimate for each job.