1. Compute the 2014 budgeted direct-cost rates for (a) professional partners and (b) professional associates.
2. Compute the 2014 budgeted indirect-cost rates for (a) general support and (b) secretarial support.
3. Compute the budgeted costs for the Richardson and Punch jobs, given the followinginformation:
| |
Richardson, Inc. |
Punch, Inc. |
| Professional partners |
50 hours |
33 hours |
| Professional associates |
75 hours |
132 hours |
4. Comment on the results in requirement 3. Why are the job costs different from those computed using the firm's previous method?
5. Would you recommend Lyon& Associates use the job-costing system in the previous method or the job-costing system in this problem?
Explain.
The average budgeted total compensation per professional for 2014 is $108,000. Each professional is budgeted to have 1,500billable hours to clients in 2014. All professionals work for clients to their maximum 1,500billable hours available. All professional labor costs are included in a singledirect-cost category and are traced to jobs on aper-hour basis. All costs of Lyon& Associates other than professional labor costs are included in a singleindirect-cost pool(legal support) and are allocated to jobs using professionallabor-hours as the allocation base. The budgeted level of indirect costs in 2014 is $2,250,000.
The cost estimates for theRichardson, Inc.job, which requires 125budgeted hours of professional labor and for thePunch, Inc.job, which requires 165budgeted hours of professional labor are asfollows:
| |
Richardson |
Punch |
| Direct-costs |
$9,000 |
$11,880 |
| Indirect-costs |
9,375 |
12,375 |
| Total costs |
$18,375 |
$24,255 |
| |
Professional Partner Labor |
Professional Associate Labor |
| Number of professionals |
4 |
16 |
| Hours of billable time per professional |
1,500 per year |
1,500 per year |
| Total compensation (average per |
$180,000 |
$90,000 |
| professional) |
Budgeted information for 2014relating to the twoindirect-cost categories is as follows:
| |
General Support |
Secretarial Support |
| Total costs |
$1,950,000 |
$300,000 |
| Cost-allocation base |
Professional labor-hours |
Partner labor-hours
|