Question

Kidman & Associates is a law firm specializing in labor relations and employee-related work. It employs 25 professionals (10 partners and 15 associates) who work directly with its clients. The average budgeted total compensation per professional for 2017 is $119,000. Each professional is budgeted to have 1,750 billable hours to clients in 2017. All professionals work for clients to their maximum 1,750 billable hours available. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of Kidman & Associates other than professional labor costs are included in a single indirect-cost pool (legal support) and are allocated to jobs using professional labor-hours as the allocation base. The budgeted level of indirect costs in 2017 is $2,187,500. Read the requirements. Requirement 1. Identify the components of the overview diagram of Kidman's job-costing system. Requirements - X 1. 2. Om o 0D Identify the components of the overview diagram of Kidman's job-costing system. Compute the 2017 budgeted direct-cost rate per hour of professional labor. Compute the 2017 budgeted indirect-cost rate per hour of professional labor. Kidman & Associates is considering bidding on two jobs: a. Litigation work for Richardson, Inc., which requires 90 budgeted hours of professional labor. b. Labor contract work for Punch, Inc., which requires 145 budgeted hours of professional labor. Prepare a cost estimate for each job. Print Done

Answer 1

Answer to 1

Diagram	Component
Legal support	Indirect cost pool
Professional Labor hours	Cost Allocation base
Professional Labor	Direct Costs

Answer to 2

Budgeted direct cost-rate per hour of a professional labor

= Budgeted compensation per professional / budgeted direct labor hours per professional

= $119000 / 1750 = $68

Answer to 3

Budgeted direct cost-rate per hour of a professional labor

= Budgeted indirect costs / Budgeted total direct labor-hours

= $2187500 / ($1750 x 25 professionals)

= $2187500 / 43750 = $50

Answer to 4

Cost estimate

		Richardson	Punch
Direct Costs	(80 hrs x $68) (135 hrs x $68)	5440	9180
Indirect Costs	(80 hrs x $50) (135 hrs x $50)	4000	6750
Total Costs		9440	15930