Brady Associates is a recently formed law partnership. Brady A6operates at capacity and uses a cost based approach to pricing (billing) each job. Currently it uses simple costing system with a single direct cost category (professional labor hours) and a single indirect cost pool (general support). indirect costs are allocated to cases on the basic of professional labor hours per case. The job files for two Brady's clients, Janek Enterprises and Quartz Inc,

1. Calculate the revised indirect cost allocation rate per profit labor hour for Brady Associates when total indirect costs are $250,000. 2. Computer the costs of the Janek Enterprises and Quartz Inc jobs if Brady Associates had used its refined costing system with multiple direct cost categories and one indirect cost pool. 3. Compare the costs of Janek Enterprises and Quartz Inc jobs in requirement 2 with those calculated using the simple costing system. Comment on the results.

rate per professional la Janek Enterprises Quartz Inc. rate. Then enter the ar Professional labor 2,800 hours 2,200 hours Professional labor costs at Brady Associates are $150 an hour. Indirect costs are allocated to cases at $110 an hour. Total indirect costs in the most recent period were $550,000 Indirect-cos Total cost of the jobs using the simple costing system are as follows: Direct professional labor Indirect costs allocated Janek Enterprises $ 420,000 $ 308,000 $ 728,000 $ Quartz Inc 330,000 242,000 572,000 Total Print Done swer Rachel Hamilton, the managing partner of Brady Associates, asks her assistant to collect details on those costs included in the $550,000 indirect-cost pool that can be traced to each individual job. After analysis, Brady is able to reclassify $300,000 of the $550,000 as direct costs: rate per professional la rate. Then enter the an Other Direct Costs Janek Enterprises Indirect-cos Research support labor $ Computer time Travel and allowances 39,000 $ 5,000 14,000 3,000 6,500 Quartz Inc. 97,000 25,000 75,000 21,000 14,500 Telephones/faxes Photocopying 67,500 $ 232,500 Total Hamilton decides to calculate the costs of each job as if Brady had used six direct-cost pools and a single indirect-cost pool. The single indirect-cost pool would have $250,000 of costs and would be allocated to each case using the professional labor-hours base. Print Done