Question
Keaton & Associates is a law firm specializing in labor relations and employee-related work. It employs 25 professionals (5 partners and 20 associates) who
Keaton & Associates is a law firm specializing in labor relations and employee-related work. It employs 25 professionals (5 partners and 20 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. (Click the icon to view the cost information and rates under the previous method.) Keaton has just completed a review of its job-costing system. 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. Budgeted information for 2014 related to the two direct-cost categories is as follows (Click the loon to view the budgeted information.) Read the requirements. Data table -X The average budgeted total compensation per professional for 2014 is $117,000. Each professional is budgeted to have 1,800 billable hours to clients in 2014. All professionals work for clients to their maximum 1,800 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 Keaton & 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 2014 is $2,385,000. The cost estimates for the Richardson, Inc. job, which requires 90 budgeted hours of professional labor and for the Punch, Inc. job, which requires 120 budgeted hours of professional labor are as follows: Requirement 1. Compute the 2014 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- cost rate per hour Partner per hour Assoc. per hour General Secretarial Requirement 2. Compute the 2014 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- cost rate per hour per hour per hour Data table 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 MacBook Pro Richardson Punch Direct-costs Indirect-costs 5,850 $ 4,770 10,620 $ 7,800 6,300 14,160 Total costs Professional Partner Labor Professional Associate Labor Number of professionals 5 Hours of bilable time por professional Total compensation (average per professional) 1,800 per year 243,000 20 1,800 per year 80,000 Budgeted information for 2014 relating to the two indirect-cost categories is as follows Total costs S General Support 1,980,000 Secretarial Support $ 405,000 Cost-allocation base Professional labor-hours Partner labor-hours
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