Nixon & Ross, a law firm, is about to install a new accounting system that will

Question

Nixon & Ross, a law firm, is about to install a new accounting system that will allow the firm to track more of the overhead costs to individual cases. Overheads are currently allocated to individual client cases based on billable professional staff salaries. Attorneys working on client cases charge their time to "billable professional staff salaries." Attorney time spent in training, law firm administrative meetings, and the like is charged to an overhead account titled "unbilled staff salaries."
The following is a summary of the costs for the current year:

Billable professional staff salaries $ 4,000,000
Overhead 8,000,000
Total costs $12,000,000

The overhead costs were as follows:

Secretarial costs $1,500,000
Staff benefits 2,750,000
Office rent 1,250,000
Telephone and mailing costs 1,500,000
Unbilled staff salaries 1,000,000
Total costs $8,000,000

Under the new accounting system, the firm will be able to trace secretarial costs, staff benefits, and telephone and mailing costs to specific clients.
The following are the costs incurred on the Lawson Company case:

Billable professional staff salaries $150,000
Secretarial costs 25,000
Staff benefits 13,500
Telephone and mailing costs 8,000
Total costs $196,500


a. Calculate the current year

Explanation / Answer

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