Wright Associates is a recently formed law partnership. Hugo Higgins,the managing partner of Wright Associates, has just finished a tense phone call with Max Janek,president of Hazen Coal.Janek strongly complained about the price Wright charged for some legal work done for Hazen Coal.

Higgins also received a phone call from its only other client (St. FranSt. Fran's Glass), which was very pleased with both the quality of the work and the price charged on its most recent job.Wright Associates operates at capacity and uses acost-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 singleindirect-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:

	Hazen Coal	St. Fran's Glass
Professional labor	125 hours	100 hours

Professional labor costs at Wright Associates are $60 an hour. Indirect costs are allocated to cases at $110 an hour. Total indirect costs in the most recent period were $24,750.

Requirements

1.	Why is it important for Wright Associates to understand the costs associated with individual jobs?
2.	Compute the costs of the Hazen Coal and St. FranSt. Fran's Glass jobs using Wright's simple costing system.

Requirement 1. Why is it important for Wright Associates to understand the costs associated with individual jobs?

A.Operating at or above capacity for the company lowers overall costs to individual jobs.

B.Pricing decisions are heavily influenced by reported cost numbers.

C.Overstaffing any job would be detrimental to the company's bottom line.

D.All of the above.