Exercise 9-7 Job Cost for a Client The partners of Mason and Hutton, attorneys-a

Question

Exercise 9-7
Job Cost for a Client

The partners of Mason and Hutton, attorneys-at-law, decide to implement an activity-based costing system for their firm. They identify the following three cost pools and budgeted amounts for each for the coming year: fringe benefits, $450,000; paralegal support, $250,000; and research support, $650,000. It is determined that the best cost driver for fringe benefits is professional labor dollars ($1,460,000); paralegal support is partner labor hours (4,000); and research support is professional labor hours (20,000).

A client, Jim Adams, requires 10 partner labor hours and 25 professional associate hours from Mason and Hutton, the law firm. Partners are paid $125 per hour, and associates make $60 per hour.

Compute the cost of the Adams' job. Round your interim calculations to two decimal places and your final answer to the nearest cent.

Its not 4652.50!!!!!!

Explanation / Answer

Cost pool Fringe benefits 30.82% of professional labor dollars =450000/1460000 Paralegal support 62.5 partner labor hour =250000/4000 Research support 32.5 professional labor hour =650000/20000 Cost of the Adams' job: Direct labor cost 2750 =(10*125)+(25*60) Overhead: Fringe benefits 462.30 =25*60*30.82% Paralegal support 625 =10*62.5 Research support 812.5 =25*32.5 Cost of the Adams' job 4649.8

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