Azman and Associates is a law firm operating in Damansara, Kuala Lumpur. The firm reported the...

Transcribed Image Text:

Azman and Associates is a law firm operating in Damansara, Kuala Lumpur. The firm reported the following average overhead costs of its yearly operation: RM Administration salary cost Utilities Transportation Stationeries Miscellaneous expenses Total overhead cost 120,000 48,000 36,000 40,000 16,000 260,000 On average, the firm handles 130 cases per year with 15,000 hours' average lawyer's time. The overhead cost is allocated based on the number of cases. The lawyer cost is charge based on hourly basis of RM400 per hour. The firm charge 45% profit margin above its all cost to the customer Farhan has employed the firm to handle his case. The case recorded 140 hours of lawyers' time. Required: (a) Determine the price that Farhan needs to pay to Azman and Associates for his case. (7 marks) (b) If the firm wants to allocate administration salary costs based on lawyer's hour time, and the remaining costs allocated based on number of cases, what would be the price that Farhan needs to pay to Azman and Associates for his case. (9 marks) (c) Which of the cost allocation basis do you think is more appropriate for the Azman and Associates for administration salary cost? Give your reasons. (4 marks) Azman and Associates is a law firm operating in Damansara, Kuala Lumpur. The firm reported the following average overhead costs of its yearly operation: RM Administration salary cost Utilities Transportation Stationeries Miscellaneous expenses Total overhead cost 120,000 48,000 36,000 40,000 16,000 260,000 On average, the firm handles 130 cases per year with 15,000 hours' average lawyer's time. The overhead cost is allocated based on the number of cases. The lawyer cost is charge based on hourly basis of RM400 per hour. The firm charge 45% profit margin above its all cost to the customer Farhan has employed the firm to handle his case. The case recorded 140 hours of lawyers' time. Required: (a) Determine the price that Farhan needs to pay to Azman and Associates for his case. (7 marks) (b) If the firm wants to allocate administration salary costs based on lawyer's hour time, and the remaining costs allocated based on number of cases, what would be the price that Farhan needs to pay to Azman and Associates for his case. (9 marks) (c) Which of the cost allocation basis do you think is more appropriate for the Azman and Associates for administration salary cost? Give your reasons. (4 marks)