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.

$ ( It is not $4649.83)

Explanation / Answer

Activity rate :

0.31 per profession labour dollar

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

Fringe benefits (450000/1460000)

0.31 per profession labour dollar

Paralegal support (250000/4000) 62.5 per partner labour hour Research support (650000/20000) 32.5 per professional labour hour

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