Walters and Witt, a law firm, is analyzing the profitability of its cases.During the year, the firm represented the Umberg Company in numerous routine legal issues, for which it charged a monthly retainer fee of $2,500.Budget information for the firm follows:

Professional labor:

Partners

$500,000

Associates

900,000

Paralegals

600,000

Total

$2,000,000

Overhead:

Secretarial salaries

$900,000

Depreciation of office equipment

300,000

Fringe benefits

400,000

Lease expense

200,000

Utilities

300,000

Communication expenses

250,000

Office supplies

150,000

Total

$2,500,000

Partner, associates and paralegal hourly salary rates are $100, $60 and $20, respectively.

Actual time spent for the Umberg cases follows:

Actual

Partners

23 hours

Associates

42 hours

Paralegals

72 hours

Walters and Witt uses activity-based costing to determine the cost of its cases.With a consultant's help, the firm has developed the following information about cost pools:

Cost Pool

Expenses Included

Cost Allocation Base

Secretarial support

Secretarial salaries

Partner labor hours

Fringe benefits

Fringe benefits

Professional labor dollars

Office support

Depreciation, lease, utilities, communications and supplies

Professional labor hours

(a) Compute the budgeted rate per unit of cost driver for each cost pool (Hint: you will have to calculate the hours for partner and total professional labor from the dollar amounts provided).

(b) Using activity-based costing, compute the cost of the Umberg work this year.

(c) Compute the profit that Walters and Witt had on the Umberg work this year.