Brown & Black is a reputable law partnership offering a variety of legal services to clients....

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Brown & Black is a reputable law partnership offering a variety of legal services to clients. The managing partner has recently sought advice in relation to improving the accuracy and efficiency of its billing system. As financial advisor to the law partnership, you suggested the introduction of activity based costing (ABC) to replace the existing traditional overhead costing method used by Brown & Black. The current costing method allocates overhead costs to clients based on total labour hours (for partners, junior clerks and secretarial support). Clients are billed based on cost plus a mark-up. In order to introduce ABC, the managing partner assigned a team to ascertain the cost and activity relationships, and corresponding cost data, and this is shown below. Cost pool Legal search Documentation Office administration (telephone, postage etc) Cost driver Number of searches conducted Number of pages printed/copied Secretarial support time spent on a case Budgeted data relating to the expense categories has also been compiled and are as follows: Cost Pool Partner salary cost 772,800 Cost driver Partner labour hours 12,880 Junior clerk wages cost 368,640 Junior clerk labour hours 15,360 Secretarial support wages cost 104,512 Secretarial support labour hours 7,360 Legal search costs 36,360 Total number of searches conducted 2,424 Printing and stationery costs 96,600 Total number of document pages printed/copied 3,220,000 Office administration costs 73,232 Continued Information relating to two legal cases completed during the year is given below: Number of searches Partner time spent on case Case 406 10 4 hours Case 1354 2 2 hour Junior clerk time spent on case Document pages printed/copied Secretarial support time spent on 10 hours 430 2 hours 6 hours 172 2 hours case Requirement (a) Calculate the total cost of each of the two legal cases noted above using: (i) The costing approach currently used by Brown & Black (ii) Activity based costing. 20 Marks Brown & Black is a reputable law partnership offering a variety of legal services to clients. The managing partner has recently sought advice in relation to improving the accuracy and efficiency of its billing system. As financial advisor to the law partnership, you suggested the introduction of activity based costing (ABC) to replace the existing traditional overhead costing method used by Brown & Black. The current costing method allocates overhead costs to clients based on total labour hours (for partners, junior clerks and secretarial support). Clients are billed based on cost plus a mark-up. In order to introduce ABC, the managing partner assigned a team to ascertain the cost and activity relationships, and corresponding cost data, and this is shown below. Cost pool Legal search Documentation Office administration (telephone, postage etc) Cost driver Number of searches conducted Number of pages printed/copied Secretarial support time spent on a case Budgeted data relating to the expense categories has also been compiled and are as follows: Cost Pool Partner salary cost 772,800 Cost driver Partner labour hours 12,880 Junior clerk wages cost 368,640 Junior clerk labour hours 15,360 Secretarial support wages cost 104,512 Secretarial support labour hours 7,360 Legal search costs 36,360 Total number of searches conducted 2,424 Printing and stationery costs 96,600 Total number of document pages printed/copied 3,220,000 Office administration costs 73,232 Continued Information relating to two legal cases completed during the year is given below: Number of searches Partner time spent on case Case 406 10 4 hours Case 1354 2 2 hour Junior clerk time spent on case Document pages printed/copied Secretarial support time spent on 10 hours 430 2 hours 6 hours 172 2 hours case Requirement (a) Calculate the total cost of each of the two legal cases noted above using: (i) The costing approach currently used by Brown & Black (ii) Activity based costing. 20 Marks