Question
Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes
Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 2020: Budget Actual Indirect costs $270,000 $300,000 Annual salary of each attorney $100,000 $110,000 Annual salary of each paraprofessional $ 29,000 $ 30,000 Total professional labor-hours 50,000 dlh 60,000 dlh
1. What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour?
a. $27.00; $4.17 b. $29.80; $5.40 c. $32.40; $5.00 d. $27.00; $5.00
2. What are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively, per professional labor-hour?
a. $27.00; $4.17 b. $29.80; $5.40 c. $32.40; $5.00 d. $27.00; $5.00
3. How much should the client be billed in an actual costing system if 200 professional labor-hours are used?
a. $5,000 b. $6,960 c. $7,480 d. $6,400
4. How much should a client be billed in a normal costing system for indirect costs when 1,000 professional labor-hours are used?
a. $32,000 b. $29,800 c. $5,400 d. $5,000
5. When a normal costing system is used to compute client bills, clients will
a. be overbilled for actual resources used. b. be underbilled for actual resources used. c. be billed accurately for actual resources used. d. result in an underallocation of direct costs.
6. When using a normal costing system, year-end accounting records will show that indirect costs are
a. applied improperly. b. underapplied. c. overbudgeted. d. overapplied.
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