Comparing the results of cost allocations, using simplified costing versus activity-based costing Ed Hickey, the consultant introduced at the beginning of section two of the chapter (p. 456), has obtained the following data relative to the Kaufman and D'Esti consulting job: Partner Labor Associate Labor Number of attorneys. Annual billable hours per attorney... Annual compensation per attorney . 2,000 $250,000 20 2,000 $100,000 Legal Support $2,500,000 Secretarial Support $1,000,000 Annual overhead estimate Assume that the Binghamton job will require 50 partner hours and 20 associate hours, while the Johnson City job will require 15 partner hours and 55 associate hours. Required: 1. Using a simplified costing system with one direct cost category for professional labor and one indirect cost category for support costs with professional labor hours as the allocation base, compute the bid price for the Binghamton job and the Johnson City job, assum- a. ing a 25% markup on cost. (Round to the nearest whole dollar.) Do you think that your results seem reasonable? b. 2. Using an activity-based costing system with two direct cost categories for partner labor and associate labor and two indirect cost categories, one for legal support and one for secretarial support with cost alloca- tion bases of professional labor hours and partner labor hours, respec- tively, compute the bid price for the Binghamton job and the Johnson City job assuming a markup of 25% on cost. 3. a. Compute the difference in bid price for each job between the simplified costing system and the activity-based costing system. b. Were the jobs undercosted, overcosted, or a combination of each? Which job had the greater differential, depending on which costing system was used, and why