Question
Nixon & Ross, a law firm, is about to install a new accounting system that will allow the firm to track more of the overhead
Nixon & Ross, a law firm, is about to install a new accounting system that will allow the firm to track more of the overhead costs to individual cases. Overheads are currently allocated to individual client cases based on billable professional staff salaries. Attorneys working on client cases charge their time to "billable professional staff salaries." Attorney time spent in training, law firm administrative meetings, and the like is charged to an overhead account titled "unbilled staff salaries."
The following is a summary of the costs for the current year:
The following is a summary of the costs for the current year:
The following is a summary of the costs for the current year:
Billable professional staff salaries | $ 4,000,000 |
Overhead | 8,000,000 |
Total costs | $12,000,000 |
The overhead costs were as follows:
Secretarial costs | $1,500,000 |
Staff benefits | 2,750,000 |
Office rent | 1,250,000 |
Telephone and mailing costs | 1,500,000 |
Unbilled staff salaries | 1,000,000 |
Total costs | $8,000,000 |
Under the new accounting system, the firm will be able to trace secretarial costs, staff benefits, and telephone and mailing costs to specific clients.
The following are the costs incurred on the Lawson Company case:
Billable professional staff salaries | $150,000 |
Secretarial costs | 25,000 |
Staff benefits | 13,500 |
Telephone and mailing costs | 8,000 |
Total costs | $196,500 |
Required:
a. Calculate the current year
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