Kane & Associates is a local legal entity employing six solicitors, four paralegals and six administrative staff. The entity has a costing system that assigns costs to clients. There are two departments - legal support and commercial. The entity uses a different indirect cost rate for each department. The following information was taken from the budget for the coming year.

The indirect costs are allocated to the clients as follows.
€¢ Departmental indirect costs - number of solicitor and paralegal hours.
€¢ Legal supplies are charged on a per client basis.
The entity uses a cost-plus pricing policy with a 20 per cent mark-up.
Client Case Number FR110 has been completed and is ready for the invoice to be sent to the client.
The following costs and times were recorded for the client.
€¢ Solicitor hours - Support 55 hours.
€¢ Solicitor hours - Commercial 175 hours.
€¢ Direct cost of solicitors - $12 960.
Required:
a. Identify the type of costs included in legal supplies and department indirect costs.
b. Calculate the indirect cost rate for each department.
c. Calculate the indirect cost rate for legal supplies.
d. Determine the total cost for Client Case FR110.
e. Calculate the amount the client should be invoiced for the work undertaken.

Transcribed Image Text:

Legal support department 3 000 Planned solicitor hours Planned paralegal hours Number of clients Legal supplies Salariessolicitors and paralegals Indirect costs Commercial department 12 000 5 000 1000 S 30000 $700000 300 S15 000 $150000 $100000 $400 000