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Cost of Good SoldBOY0 J/E #94,020 130 J/E #10EOY3,890 MOH allocated at 160% of direct mfg. labor costs($1,300X 160%)
Exercise 4-32: Service industry, job costing, law firmGiven:Keating & Associates is a law firm specializing in labor relations and employee-relatedare included in a simple direct-cost category and are traced to jobs on a per-hour basis. Allcosts of Keating & Associates other than professional labor costs are included in a singleindirect-cost pool (legal support) and are allocated to jobs using professional labor-hours asRequired:1. Prepare an overview diagram of the job-costing system used at the Keating & AssociatesLaw Firm.2. Compute the 2011 budgeted direct-cost rate per hour of professional labor. 3. Compute the 2011 budgeted indirect-cost rate per hour of professional labor. 4. Keating & Associates is considering bidding on two jobs:of professional laborof professional laborPrepare a cost estimate for each job.Could simplify accounting system by using a single rate as follows:Application rate = ($65 + $55) = $120$12,000$18,000work. It employs 25 professionals (5 partners and 20 associates) who work directly withits clients. The average budgeted total compensation per professional for 2011 is $104,000Each professional is budgeted to have 1,600 billable hours to clients in 2011. All professionalswork for clients to their maximum 1,600 billable hours available. All professional labor coststhe allocation base. The budgeted level of indirect costs in 2011 is $2,200,000..=
Exercise 4-33: (Continuation of 4-32)Keating has just completed a review of its job-costing system. This review included a detailed analysis of how past jobs used the firm's resources and interviews with personnel about what factors drive the level of indirect costs. Management concluded that a system with two direct-cost categories (professional partner labor and professionalassociate labor) and two indirect-cost categories (general support and secretarial support) would yield more accuratejob costs. Budgeted information for 2011 related to the two direct-cost categories is as follows:Professional Partner Labor Professional Associate LaborNumber of professionals5 20 Hours of billable time per professional per year1,600 1,600 total compensation (average per professional)$200,000 $80,000 Budgeted information for 2011 relating to the two indirect-cost categories is as follows: