costacctg13_sm_ch05

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Unformatted text preview: have made money. Client relationships. MD/MI provides a better “road map” for clients to understand how costs are accumulated at Wigan Associates. Wigan can use this road map when meet ing wit h clients to plan the work to be done on a case before it commences. Clients can negotiate ways to get a lower­cost case fro m Wigan, given the informat ion in MD/MI—for example, (a) use a higher proportion o f associate labor time and a lower proportion o f a partner t ime, and (b) use fax machines more and air travel less. If clients are informed in advance how costs will be accumulated, there is less likelihood of disputes about bills submitted to them after the work is done. Cost control. The MD/MI approach better highlights the individual cost areas at Wigan Associates than does the SD/SI or MD/SI approaches: MD/MI 7 2 9 SD/SI 1 1 2 MD/SI 7 1 8 Number of direct cost categories Number of indirect cost categories Total MD/MI is likely to promote better cost­control practices than SD/SI or MD/SI, as the nine cost categories in M...
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