Job costing with two direct- and two indirect-cost categories, law firm (continuation of 4-32). Keating has just completed a review ofits job-costing system. This review included a detailed analysis of how past jobs used the firm’s resources and interviews with personnel about what factors drive the level ofindirect costs. Management concluded that a system with two direct-cost categories (professional partner labour and professional manager labour) and two indirect-cost categories (general support and secretarial support) would yield more accu¬

rate job costs. Budgeted information for 2007 related to the two direct-cost categories is as follows:

Professional Professional Partner Labour Manager Labour Number of professionals 5 20 Hours of billable time per professional 1,600 per year 1,600 per year Total compensation (average per professional) $240,000 $96,000 Budgeted information for 2007 relating to the two indirect-cost categories is General Support Secretarial Support

$2,160,000 Professional labour-hours 146 CHAPTER 4 40,000 hours Total costs Cost allocation base

$480,000 Partner labour-hours 8,000 hours The budgeted total number of days out oftown for all professionals in 2007 is 2,000 days.

Required 1. Compute the 2007 budgeted direct-cost rates for

(a) professional partners and

(b) profes¬

sional managers.

2. Compute the 2007 budgeted indirect-cost rates for

(a) general support and

(b) secretarial support.

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

Richardson, Inc. Punch, Inc.

Professional partners 60 hours 30 hours Professional managers 40 hours 120 hours 4. Comment on the results in requirement 3. Why are the job costs different from those computed in Problem 4-32?