Problem 1) Sanders and Partners is a law firm specializing in labor relations and employec-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. The average budgeted total compensation per professional for 2020 is $97,500. Each professional is budgeted to have 1,500 billable hours to clients in 2020. All professionals work for clients to their maximum 1,500 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 Sanders and Partners 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 2020 is $2,475,000 Required: a. Compute the 2020 budgeted direct-cost rate per hour of professional labor. b. Compute the 2020 budgeted indirect-cost rate per hour of professional labor. c. Sanders and Partners is considering bidding on two jobs: I. Litigation work for, Hopkins Corporation, which requires 120 budgeted hours of professional labor ii. Labor contract work for Williams Corporation, which requires 160 budgeted hours of professional labor. Prepare a cost estimate for each job. Problem 2) Sanders 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 2020 related to the two direct-cost categories is as follows: Professional Partner Labor Professional Associate Labor Number of professionals 5 25 Hours of billable time per professional 1,500 per year 1,500 per year Total compensation (average per S210,000 $75,000 professional) Budgeted information for 2020 relating to the two indirect-cost categories is as follows: General Support Secretarial Support Total costs $2,025,000 $450,000 Cost-allocation base Professional labor-hours Partner labor-hours Required: Budgeted information for 2020 relating to the two indirect-cost categories is as follows: General Support Secretarial Support Total costs $2,025,000 $450,000 Cost-allocation base Professional labor-hours Partner labor-hours Required: a. Compute the 2020 budgeted direct-cost rates for (a) professional partners and (b) professional associates. b. Compute the 2020 budgeted indirect-cost rates for (a) general support and (b) secretarial support. c. Compute the budgeted costs for the Hopkins and Williams jobs, given the following information: Hopkins Corp. Williams Corp. Professional partners 48 hours 32 hours Professional associates 72 hours 128 hours d. Comment on the results in requirement c. Why are the job costs different from those computed in
