Question 1 Job costing with single direct-cost category, single indirect-cost pool, law firm. Wigan Associates is a recently formed law partnership. Ellery Hanley, the managing partner of Wigan Associates, has just finished a tense phone call with Martin Offiah, president of Widnes Coal. Offiah strongly complained about the price Wigan charged for some legal work done for Widnes Coal. Hanley also received a phone call from its only other client (St. Helen's Glass), which was very pleased with both the quality of the work and the price charged on its most recent job. Wigan 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 professional labor-hours per case. The job files show the following: Widnes Coal St. Helen's Glass Professional labor 104 hours 96 hours Professional labor costs at Wigan Associates are $70 an hour. Indirect costs are allocated to cases at $105 an hour. Total indirect costs in the most recent period were $21,000. Required: 1. Why is it important for Wigan Associates to understand the costs associated with individual jobs? 2. Compute the costs of the Widnes Coal and St. Helen's Glass jobs using Wigan's simple costing system. 3. Hanley asks his assistant to collect details on those costs included in the $21,000 indirect-cost pool that can be traced to each individual job. After analysis, Wigan is able to reclassify $14,000 of the $21,000 as direct costs: (a) What is the revised indirect-cost allocation rate per professional labor-hour for Wigan Associates required when total indirect costs are $7,000? (b) Compute the costs of the Widnes and St. Helen's jobs if Wigan Associates had used its refined costing system with multiple direct-cost categories and one indirect-cost pool. (c) Compare the costs of Widnes and St. Helen's jobs in requirement (b) above with those in requirement 2. Comment on the results. Question 2 Weighted-average method, equivalent units. Consider the following data for the assembly division of Fenton Watches, Inc.: The assembly division uses the weighted-average method of process costing. Physical Units (Watches) Conversion. Costs Direct Material Beginning work in process (May 1) a 80 $493,360 $91,040 Started in May 2012 Completed during May 2012 Ending work in process (May 31)b Total costs added during May 2012 500 460 120 $3,220,000 $1,392,000 a Degree of completion: direct materials, 90%; conversion costs, 40%. b Degree of completion: direct materials, 60%; conversion costs, 30%. Other Direct Costs Research support labor Widnes Coal $1,600 St. Helen's Glass $3,400 Computer time 500 1,300 Travel and allowances 600 4,400 Telephones/faxes 200 1,000 Photocopying Total 250 $3,150 750 $10,850 Hanley decides to calculate the costs of each job as if Wigan had used six direct cost-pools and a single indirect-cost pool. The single indirect-cost pool would have $7,000 of costs and would be allocated to each case using the professional labor-hours base. Required: Required: 1. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule. 2. Summarize total costs to account for, calculate cost per equivalent unit for direct materials and conversion costs, and assign total costs to units completed (and transferred out) and to units in ending work in process. 3. Suppose the assembly division at Fenton Watches, Inc., uses the FIFO method of process costing instead of the weighted-average method. Compute equivalent units for direct materials and conversion costs. Show physical units in the first column of your schedule.