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.
$

Explanation / Answer

Cost pools Estimated cost E Cost Driver C Activity rate E/C Fringe Benefits $450,000 $1,460,000 0.31 Paralegal Support $250,000 4000 62.5 Research Support $650,000 20000 32.5 Computation of cost of Adam's Job No. of hours Cost per hour Total Cost N*C Partners 10 $125 $1,250.00 Professional associate 25 $60 $1,500.00 Overhead $1,900.00 Frienge Benefit ( 0.31*$1500) $465.00 Paralegal Support (62.50*10 Hour) $625.00 Research Support (32.55*25) $813.75 Total cost of job $4,649.83

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