CaseyCasey

Associates is a recently formed law partnership.

SydneySydney

HigginsHiggins,

the managing partner of

CaseyCasey

Associates, has just finished a tense phone call with

PaulPaul

GriffinGriffin,

president of

GriffinGriffin

Enterprises.

PaulPaul

strongly complained about the price

CaseyCasey

charged for some legal work done for his company.

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.Requirement 1. Why is it important for

CaseyCasey

Associates to understand the costs associated with individual jobs?

A.

Operating at or above capacity for the company lowers overall costs to individual jobs.

B.

Pricing decisions are heavily influenced by reported cost numbers.

C.

Overstaffing any job would be detrimental to the company's bottom line.

D.

All of the above.

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HigginsHiggins

also received a phone call from its only other client,

PearlPearl,

Inc., which was very pleased with both the quality of the work and the price charged on its most recent job.

CaseyCasey

Associates operates at capacity and uses a cost-based approach to pricing(billing) each job. Currently it uses a 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 basis of professionallabor-hours per case. The job files show the following:

	Griffin Enterprises	Pearl Inc.
Professional labor	2,500 hours	2,500 hours

Professional labor costs at

CaseyCasey

Associates are

$ 230$230

an hour. Indirect costs are allocated to cases at

$ 125$125

an hour. Total indirect costs in the most recent period were

$ 625 comma 000$625,000.