Barcelona Firm is a reputable law partnership offering a variety of legal services to clients. The managing

partner has recently sought advice in relation to improving the accuracy and efficiency of its billing

system. The advisor, CPA Frank, suggested the introduction of Activity Based Costing (ABC) to replace the existing traditional overhead costing method used by Pan +African. The current costing method allocates overhead costs to clients based on total labour hours (for partners, junior clerks and secretarial support). Clients are billed based on cost plus a mark-up of 60%. In order to introduce ABC costing methods the managing partner assigned a team, comprising one partner and two junior

clerks, to ascertain the cost and activity relationships, and corresponding cost data, and this is shown

below:

REQUIRED

Calculate the total cost of each of the cases noted above using:

The existing costing method Activity based costing Comment briefly on your answers at (a) (i) and (if) above

Cost activity relationships Cost pool Legal search Documentation Office administration (Telephone, Postage, etc) Cost and activity data: Partner salary cost Junior clerk wages cost Secretarial support wages cost Legal search costs Printing and stationery costs Office administration costs Partner labour hours Junior clerk labour hours Secretarial support labour hours Total number of searches conducted Total number of document pages printed/copied Details relating to two legal cases: Number of searches Partner time spent on case Junior clerk time spent on case Document pages printed Secretarial support time spent on case Cost driver Number of searches conducted Number of pages printed/copied Secretarial support time spent on case TZS. 38,640,000 18,432,000 5,225,600 Case 1406 5 2 hours 5 hours copied 215 1 hour 1,818,000 4,830,000 3,661,600 6,440 7,680 3,680 1,212 1,610,000 Case 2655 1 1 hour 3 hours pages 86 pages 1 hour