This is the book: Cost accounting edition 15

This is the chapter :Chapter 5

Q 30 and 31

Please

3. What changes would you recommend for USB's Premier Account? Problems 5-30 Job costing with single direct-cost category, single indirect-cost pool, law firm. Bradley Associates is a recently formed law partnership. Emmit Harrington, the managing partner of Bradley Associates, has just finished a tense phone call with Martin Omar, president of Campa Coal. Omar strongly complained about the price Bradley charged for some legal work done for Campa Coal. Harrington also received a phone call from its only other client (St. Edith's Glass), which was very pleased with both the quality of the work and the price charged on its most recent job. Bradey 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 profes- sional labor-hours per case. The job files show the following: Campa Coal 150 hours St. Edith's Glass 100 hours Professional labor Professional labor costs at Bradley Associates are $80 an hour. Indirect costs are allocated to cases at $100 an hour. Total indirect costs in the most recent period were $25,000. Why is it important for Bradley Associates to understand the costs associated with individual jobs? 2. 1. Compute the costs of the Campa Coal and St. Edith's Glass jobs using Bradley's simple costing system. 5-31 Job costing with multiple direct-cost categories, single indirect-cost pool, law firm (continuation of5-30). Harrington asks his assistant to collect details on those costs included in the $25,000 indirect-cost pool that can be traced to each individual job. After analysis, Bradley is able to reclassify $15,000 of the 25,000 as direct costs Other Direct Costs Research support labor Computer time Travel and allowances Telephones/faxes Photocopying Total Campa Coal St. Edith's Glass $1,800 400 700 250 300 3,450 S 3,850 1,600 4,200 1,200 700 $11,550 Harrington decides to calculate the costs of each job as if Bradley had used six direct cost-pools and a single indirect-cost pool. The single indirect-cost pool would have $10,000 of costs and would be allocated 1. Calculate the revised indirect-cost allocation rate per professional labor-hour for Bradley Associates 2. Compute the costs of the Campa and St. Edith's jobs if Bradley Associates had used its refined costing 3. Compare the costs of Campa and St. Edith's jobs in requirement 2 with those in requirement 2 of to each case using the professional labor-hours base. when total indirect costs are $10,000. system with multiple direct-cost categories and one indirect-cost pool. Problem 5-30. Comment on the results