Comparisons of a simplified costing system with an activitybased system (continuation of E9-5 and E9-6)

Prior to instituting an activity-based costing system, Fiorelli and Tracey, the attorneys in E9-5 and E9-6, utilized a simplified costing system with one direct cost category (professional labor) and one indirect cost category (professional support). The average wage rate for professional labor was \(\$ 75\) per hour, and the overhead rate for professional support was \(\$ 27.78\) per professional labor hour.

Compute the job cost for Betty Barnett, the client in E9-6, using the simplified costing system; then determine the difference between this cost and the job cost using activity-based costing in E9-6 and discuss the reasons for the difference.