=+6-40 K Job costing with single direct cost category, single indirect cost pool, law firm OBJECTIVES 2,

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=+6-40 K Job costing with single direct cost category, single indirect cost pool, law firm OBJECTIVES 2, 5 Boyce & Strong is a recently formed law partnership. James Fox, the managing partner of Boyce & Strong, has just finished a tense telephone call with Paul Ogle, managing director of Jade Publishing. Ogle strongly complained about the price Boyce & Strong charged for some legal work done for Jade Publishing.

James Fox also received a telephone call from its only other client (Optical Solutions), which was very pleased with both the quality of the work and the price charged on its most recent job.

Boyce & Strong operates at capacity and uses a cost-based approach to pricing (billing) each job. Currently it uses a simple costing system with a single direct cost category (professional labour-hours) and a single indirect cost pool (general support). Indirect costs are allocated to cases on the basis of professional labour-hours per case. The job files show the following:

Jade Publishing Optical Solutions Professional labour 104 hours 96 hours Professional labour costs at Boyce & Strong are $70 an hour. Indirect costs are allocated to cases at $105 an hour. Total indirect costs in the most recent period were $21000.

Required 1 Why is it important for Boyce & Strong to understand the costs associated with individual jobs?

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