Walters and Witt, a law firm that uses job-order costing, 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:

Partner, associates, and paralegal hourly salary rates are $100, $60, and $20, respectively. Budgeted and actual time for the Umberg case follows:

In addition, the firm incurred $875 in travel costs related to Umberg, but the firm had budgeted for $1,000 of direct costs.(a) Assuming that Walters and Witt allocate overhead to jobs using direct labor cost as the cost driver, compute the predetermined overhead rate.(b) Compute the cost of the Umberg work this year.
(c) Prepare a cost-performance report for the Umberg work this year.
(d) Compute the profit that Walters and Witt had on the Umberg work this year.
 
 

Direct labor: Partners $ 500,000 Associates Paralegals Total 900,000 600,000 $2,000,000 Overhead: Secretarial support Depreciation of office equipment Fringe benefits Lease expense Utilities Communication expenses Office supplies Total 900,000 300, 00 400,000 200, 00 300,000 250,000 150,000 $2,500,000