Question

P4-37 (similar to) Kinnett & Associates is a law firm specializing in labor relations and employee-related work. It employs 30 professionals (10 partners a for 2017 is $105,000. Each professional is budgeted to have 1,500 billable hours to clients in 2017. All professionals work for clients to category and are traced to jobs on a per hour basis. All costs of Kinnett & Associates other than professional labor costs are included i allocation base. The budgeted level of indirect costs in 2017 is $2,835,000. Read the requirements. Requirement 1. Identify the components of the overview diagram of Kinnett's job-costing system. S Oo Wuo I

Answer 1

1) DIAGRAM COMPONENTS

A- Indirect cost pool i.e. Legal support

B- Indirect cost pool i.e Professional hours

C- Cost allocation Base - total professional hours 2017

D-  total professional cost for professionals (direct cost)

E-Cost Product or total cost

F- indirect costs

G -direct costs

H- Professionals compensation

2	Budgeted Direct cost rate per hour professional labor
	Average budgeted total compensation/ budgeted hours for 2017	$105,000/1500	$70/hour
3	Budgeted indirect cost rate per hour professional labor
	Total budgeted indirect cost/ total budgeted hours for 2017	$2,835,000/45000	$63/hour
	Working-
	Budgeted hours = 1500 hours per professional
	total hours for 30 professionals = 1500*30=45000 hours
4a	Cost estimate for litigation job for Richardson Inc.
	Direct cost (80hours *$70/hour(#2))	$            5,600.00
	Indirect cost (80hours*$63/hour(#3))	$            5,040.00
	Total cost estimate for litigation Job	$          10,640.00
4b	Cost estimate for labour contract for Punch Inc.
	Direct cost (120hours *$70/hour(#2))	$            8,400.00
	Indirect cost (120hours*$63/hour(#3))	$            7,560.00
	Total cost estimate for labour contract'	$          15,960.00