13. Lyon & Associates is a law firm specializing in labor relations and employee-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. Previously the firm accounted for all professional labor cost in a single direct-cost account and all other costs in a single indirect-cost pool. 20(Click the icon to view the cost Information and rates under the previous method.) Lyon has just completed a review of its job-costing system (Click the loon to view the job-costing review information) Budgeted information for 2017 related to the two direct-cost categories is an follows: 28(Click the icon to view the budgeted information) Read the requirements20 26: Data Table The average budgeted total compensation per professional for 2017 is $97,500. Each professional is budgeted to have 1,500 billable hours to clients in 2017. All professionals work for clients to their maximum 1,500 billable hours available. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of Lyon & Associates other than professional labor costs are included in a single indirect-cost pool (legal support) and are allocated to jobs using professional labor-hours as the allocation base. The budgeted level of indirect costs in 2017 is $2,475,000 The cost estimates for the Richardson, Inc. job, which requires 115 budgeted hours of professional labor and for the Punch, Inc. job, which requires 140 budgeted hours of professional labor are as follows: Richardson Punch Direct-costs $ 7,475 $ 9,100 Indirect costs 7.700 Total costs 13,800 $ 16,800 6,325 $ 27: More Info 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 of Indirect 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 secretarial support) would yield more accurate job costs. 28: Data Table Professional Partner Labor 5 Professional Associate Labor Number of professionals 25 Hours of billable time per professional 1,500 per year 1,500 per year Total compensation (average per 210,000 75,000 professional) Budgeted information for 2017 relating to the two indirect-cost categories is as follows: General Support Secretarial Support Total costs $ 2,025,000 450,000 Cost-allocation base Professional labor-hours Partner labor-hours 29: Requirements 1. Compute the 2017 budgeted direct-cost rates for (a) professional partners and (b) professional associates, 2. Compute the 2017 budgeted indirect-cost rates for (a) general support and (b) secretarial support 3. Compute the budgeted costs for the Richardson and Punch jobs, given the following information: Richardson, Inc. Punch, Inc. Professional partners 46 hours 28 hours Professional associates 69 hours 112 hours 4. Comment on the results in requirement 3. Why are the job costs different from those computed using the firm's previous method? 5. Would you recommend Lyon & Associates use the job-costing system in the previous method or the job-costing system in this problem? Explain 29 80 Requirement 1. Compute the 2017 budgeted direct-cost rates for (a) professional partners and (b) professional associates Begin by selecting the formula, then enter the amounts to compute both rates. (Abbreviations used: Assoc. = Associate.) Budgeted direct (2) cost rate per hour Partner per hour per hour Requirement 2. Compute the 2017 budgeted indirect-cost rates for (a) general support and (b) secretarial support. Begin by selecting the formula, then enter the amounts to compute both rates. (Round your answers to the nearest whole dollar.) Budgeted indirect (3) (4) cost rate per hour General Assoc. 1 per hour Secretarial per hour Requirement 3. Compute the budgeted costs for the Richardson and Punch jobs based upon the hours each job is budgeted to use. Richardson, Inc. Punch, Inc. Direct-costs: Professional partners Professional associates Direct-costs Indirect-costs General support Secretarial support Indirect costs Total costs Requirement 4. Comment on the results in requirement 3. Why are the job costs different from those computed using the firm's previous method? In requirement 3 the cost system is (5) than the firm's previous method. The two jobs (6) The Richardson job has a relatively higher use of (7) and therefore the allocation method used in requirement 3 (8) cost of the job when compared to the previous method. Requirement 5. Would you recommend Lyon & Associates use the job-costing system in the previous method or the job-costing system in this problem? Explain. the I would recommend that Lyon & Associates use the job costing system (9) with two direct- and two indirect-cost categories. The job costing system (10) more accurately represents the costs incurred on different jobs and therefore helps managers make better decisions