Question

Bradley Associates is a recently formed law partnership. Emmit Harrington, the managing partner of Bradley Associates, has just finished a tense phone call with Martin Omar, president of Campa Coal. Omar strongly complained about the price Bradley charged for some legal work done for Campa Coal.
Harrington also received a phone call from its only other client (St. Edith’s Glass), which was very pleased with both the quality of the work and the price charged on its most recent job.
Bradley Associates operates at capacity and uses a cost-based approach to pricing (billing) each job. Currently it uses a simple costing system with a single direct-cost category (professional labor-hours) and a single indirect-cost pool (general support). Indirect costs are allocated to cases on the basis of professional labor-hours per case. The job files show the following:


Professional labor costs at Bradley Associates are $ 80 an hour. Indirect costs are allocated to cases at $ 100 an hour. Total indirect costs in the most recent period were $ 25,000.

Required
1. Why is it important for Bradley Associates to understand the costs associated with individual jobs?
2. Compute the costs of the Campa Coal and St. Edith’s Glass jobs using Bradley’s simple costingsystem.


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  • CreatedMay 14, 2014
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