Job costing with single direct-cost category, single indirect-cost pool, law firm. Wigan

. Widnes Coal costs, $18,200 Associates is a recently formed law partnership. Ellery Hanley, the managing partner of

: tie Wigan Associates, has just finished a tense phone call with Martin Offiah, president of Widnes Coal. Offiah complained about the price Wigan charged for some legal work done for Widnes Coal.

Hanley also received a phone call from its only other client (St. Helen’s Glass) saying it was very pleased with both the quality of the work and the price charged on its most recent case.

Wigan Associates operates at capacity and uses a cost-based approach to pricing

(billing) each job. Currently it uses a single direct-cost category (for professional labourhours)

and a single indirect-cost pool (general support). Indirect costs are allocated to cases on the basis of professional labour-hours per case. The case files show the following:

REQUIRED 1. Why is it important for Wigan Partners to understand the costs associated with individual cases?
2. Compute the costs of the Widnes Coal and St. Helen’s Glass cases using Wigan’s simple costing system.LO1

Transcribed Image Text:

Professional labour Widnes Coal 104 hours St. Helen's Glass 96 hours Professional labour costs at Wigan Associates are $70 an hour. Indirect costs are allo- cated to cases at $105 an hour. Total indirect costs in the most recent period were $21,000.