Chapter 5, Problem 5.32P

Job costing with multiple direct-cost categories, single indirect-cost pool, law firm (continuation of 5-31). Peyton asks her assistant to collect details on those costs included in the $500,000 indirect-cost pool that can be traced to each individual job. After analysis, Wharton is able to reclassify $300,000 of the $500,000 as direct costs:

Other Direct Costs	Steger Enterprises	Bluestone Inc.
Research support labor	$36,000	$ 77,000
Computer time	8,000	32,000
Travel and allowances	14,000	84,000
Telephones/faxes	5,000	24,000
Photocopying	6,000	14,000
Total	$69,000	$231,000

Peyton decides to calculate the costs of each job as if Wharton had used six direct-cost pools and a single indirect-cost pool. The single indirect-cost pool would have $200,000 of costs and would be allocated to each case using the professional labor-hours base.

1. 1. Calculate the revised indirect-cost allocation rate per professional labor-hour for Wharton Associates when total indirect costs are $200,000.

Required

1. 2. Compute the costs of the Steger Enterprises and Bluestone Inc. jobs if Wharton Associates had used its refined costing system with multiple direct-cost categories and one indirect-cost pool.
2. 3. Compare the costs of Steger Enterprises and Bluestone Inc. jobs in requirement 2 with those in requirement 2 of Problem 5-31. Comment on the results