Wigan Associates is a recently formed law partnership. Wigan Associates operates at capacity and uses a cost-based approach to pricing (billing) each job. Wigan currently uses a simple costing system. (Click the icon to view the data using the simple costing system.) Sara Hayes, the managing partner of Wigan Associates, decided to try and further refine the costing system (Click the icon to view the data.) (Click the icon to view additional information.) Read the requirements Requirement 1. Compute the costs of the Parker Enterprises and Stonemark Inc.'s cases using Wigan's further refined system, with multiple direct-cost categories and multiple indirect-cost pools. Begin by determining the formulas you will use to calculate the direct partner cost of the job and the direct associate cost of the job. = Partner direct costs of job = Associate direct costs of job Now determine the formulas you will use to calculate the indirect costs for partners and the indirect costs for associates. = Partner indirect costs of job = Associate indirect costs of job Now compute the total costs of each job using the multiple direct-cost categories and multiple indirect-cost pools. (Round your answers to the nearest whole dollar.) Parker Stonemark Enterprises Inc. Direct costs: Partner professional labor Associate professional labor Research support labor Computer time Travel and allowances Telephones/faxes Photocopying Total direct costs Indirect costs to be allocated: Indirect costs for partners Indirect costs for associates Total indirect costs Total costs of job Requirement 2. For what decisions might Wigan Associates find it more useful to use this job-costing approach rather than the approaches of a simple costing system or a refined costing sytem with multiple direct-cost categories and one indirect-cost pool? A. Better employee work ethic on case projects because Wigan Associates will be able to staff employees in assignments they prefer to work on. B. Better client relationships since it will provide a better "road map" for clients to understand how costs are accumulated at Wigan Associates. OC. Better decisions are made on pricing and product since it will reduce the likelihood of Wigan Associates losing cases on which it would have made money. D. Better cost control based on individual cost areas of direct and indirect cost categories which allows Wigan Associates to effectively manage the categories. E. Better managers on client budgets since Wigan Associates can now cut out the middle-man work product and efficiently do the work themselves. Data Table - X 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: Parker Enterprises Stonemark Inc. Professional labor 2,700 hours 2,300 hours Professional labor costs at Wigan Associates are $240 an hour. Indirect costs are allocated to cases at $115 an hour. Total indirect costs in the most recent period were $575,000 Print Done Data Table Hayes asks her assistant to collect details on those costs included in the $575,000 indirect-cost pool that can be traced to each individual job. After analysis, Wigan is able to reclassify $350,000 of the $575,000 as direct costs: Other Direct Costs Parker Enterprises Stonemark Inc. Research support labor $ 38,000 $ 146,600 Computer time 5,000 28,000 Travel and allowances 13,000 76,000 Telephones/faxes 3,000 20,000 Photocopying 6,200 14,200 $ 65,200 $ 284,800 Total Hayes 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 $225,000 of costs and would be allocated to each case using the professional labor-hours base. Wigan Associates is a recently formed law partnership. Wigan Associates operates at capacity and uses a cost-based approach to pricing (billing) each job. Wigan currently uses a simple costing system. (Click the icon to view the data using the simple costing system.) Sara Hayes, the managing partner of Wigan Associates, decided to try and further refine the costing system (Click the icon to view the data.) (Click the icon to view additional information.) Read the requirements Requirement 1. Compute the costs of the Parker Enterprises and Stonemark Inc.'s cases using Wigan's further refined system, with multiple direct-cost categories and multiple indirect-cost pools. Begin by determining the formulas you will use to calculate the direct partner cost of the job and the direct associate cost of the job. = Partner direct costs of job = Associate direct costs of job Now determine the formulas you will use to calculate the indirect costs for partners and the indirect costs for associates. = Partner indirect costs of job = Associate indirect costs of job Now compute the total costs of each job using the multiple direct-cost categories and multiple indirect-cost pools. (Round your answers to the nearest whole dollar.) Parker Stonemark Enterprises Inc. Direct costs: Partner professional labor Associate professional labor Research support labor Computer time Travel and allowances Telephones/faxes Photocopying Total direct costs Indirect costs to be allocated: Indirect costs for partners Indirect costs for associates Total indirect costs Total costs of job Requirement 2. For what decisions might Wigan Associates find it more useful to use this job-costing approach rather than the approaches of a simple costing system or a refined costing sytem with multiple direct-cost categories and one indirect-cost pool? A. Better employee work ethic on case projects because Wigan Associates will be able to staff employees in assignments they prefer to work on. B. Better client relationships since it will provide a better "road map" for clients to understand how costs are accumulated at Wigan Associates. OC. Better decisions are made on pricing and product since it will reduce the likelihood of Wigan Associates losing cases on which it would have made money. D. Better cost control based on individual cost areas of direct and indirect cost categories which allows Wigan Associates to effectively manage the categories. E. Better managers on client budgets since Wigan Associates can now cut out the middle-man work product and efficiently do the work themselves. Data Table - X 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: Parker Enterprises Stonemark Inc. Professional labor 2,700 hours 2,300 hours Professional labor costs at Wigan Associates are $240 an hour. Indirect costs are allocated to cases at $115 an hour. Total indirect costs in the most recent period were $575,000 Print Done Data Table Hayes asks her assistant to collect details on those costs included in the $575,000 indirect-cost pool that can be traced to each individual job. After analysis, Wigan is able to reclassify $350,000 of the $575,000 as direct costs: Other Direct Costs Parker Enterprises Stonemark Inc. Research support labor $ 38,000 $ 146,600 Computer time 5,000 28,000 Travel and allowances 13,000 76,000 Telephones/faxes 3,000 20,000 Photocopying 6,200 14,200 $ 65,200 $ 284,800 Total Hayes 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 $225,000 of costs and would be allocated to each case using the professional labor-hours base