Problem

Lewis & Associates is a law firm specializing in labor relations and employee-related work. It employs 25 professionals (7 partners and 18 associates) who work directly with its clients. The average budgeted total compensation per professional for 2014 is $110,000. Each professional is budgeted to have 2,000 billable hours to clients in 2014. All professionals work for clients to their maximum 2,000 billable hours available. Al professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. Al costs of Lewis & 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 2014 is $2,250,000.

Requirements

1. Identify the components of the overview diagram of Lewis's job-costing system.

2. Compute the 2014 budgeted direct-cost rate per hour of professional labor.

3. Compute the 2014 budgeted indirect-cost rate per hour of professional labor.

4. Lewis & Associates is considering bidding on two jobs:

a. Litigation work for Richardson, Inc., which requires 115 budgeted hours of professional labor.
b. Labor contract work for Punch, Inc., which requires 140 budgeted hours of professional labor. Prepare a cost estimate for each job.