Job costing with a refined costing system, law firm. (Continuation of 4-25) 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. This review included a detailed analysis of how past jobs used the company's resources and interviews with personnel about what factors drive the level of indi- rect 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 out-of-town support) would vield more accurate job costs. Budgeted information for 196 related to the two direct cost categories is:

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 196 relating to the two indirect cost categories is:

General Out-of-Town Support Support Total costs $1,800,000 $400,000 Cost allocation base Professional labor-hours Days out of town The budgeted total number of days out of town for all professionals in 196 is 2,000 days.

Required 1. Present an overview diagram of the refined costing system.

2. Compute the 196 budgeted direct cost rates for

(a) professional partners and

(b) profes- sional associates.

3. Compute the 196 budgeted indirect cost rates for

(a) general support and

(b) out-of- town suppc rt.

4. Compute the budgeted job costs for the Richardson Inc. and Punch Inc. jobs, given the following information:

Richardson Inc. Punch Inc.

Professional partners Professional associates Da/s out of town 5. Comment on the results in requirement 4. Why are the job costs different from those computed in requirement 4 of Problem 4-25?