Service industry, job costing, law firm. Kidman & ...

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Service industry, job costing, law firm.
 
  Kidman & Associates is a law firm specializing in labor relations and employee-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. The average budgeted total compensation per professional for 2014 is 97,500. Each professional is budgeted to have 1,500 billable hours to clients in 2014. All professionals work for clients to their maximum 1,500 billable hours available. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of Kidman & 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 2,475,000.
 
  Required:
  1. Prepare an overview diagram of Kidman'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. Kidman & Associates is considering bidding on two jobs:
  a. Litigation work for Richardson, Inc., which requires 120 budgeted hours of professional labor
  b. Labor contract work for Punch, Inc., which requires 160 budgeted hours of professional labor
  Prepare a cost estimate for each job.

Question 2

Which of the following is a principle of AICPA's Code of Professional Conduct?
 
  A) be in compliance with professional standards of all professional bodies
  B) adequately plan and supervise all professional services
  C) cooperate with other professional members to improve the art of accounting and to maintain the public's confidence
  D) obtain sufficient and relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed

[katara]

Answer to Question 1

1.

2. =
=
= 65 per professional labor-hour

Note that the budgeted professional labor-hour direct-cost rate can also be calculated by dividing total budgeted professional labor costs of 2,925,000 (97,500 per professional  30 professionals) by total budgeted professional labor-hours of 45,000 (1,500 hours per professional  30 professionals), 2,925,000  45,000 = 65 per professional labor-hour.

=
=
=
= 55 per professional labor-hour

4. Richardson Punch
Direct costs:
Professional labor, 65  120; 65  160
Indirect costs:
Legal support, 55  120; 55  160
 7,800

6,600
14,400
10,400

8,800
19,200

Answer to Question 2

C
Explanation: C) Cooperating with other professional members to improve the art of accounting and to maintain the public's confidence is part of the responsibilities principle as per AICPA's Code of Professional Conduct.

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TYSM

[shailee]

Thanks for the timely response, appreciate it