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Casey Associates is a recently formed law partnership. Casey Associates operates at capacity and uses a cost-based approach to pricing (billing) each job. Casey currently uses a simple costing system. (Click the icon to view the data using the simple costing system.) Cindy Hadlock, the managing partner of Casey Associates decided to try and further refine the costing system (Click the icon to view the data.) (Click the icon to view additional information.) Read the requirements. Data table ..... Requirement 1. Compute the costs of the Janek Enterprises and Centura Inc.'s cases using Casey's further refined system, with multiple direct-cost categories and multiple indirect-cost pools. Begin by determining the formulas you will use to calculate the direct partner cost of the job and the direct associate cost of the job. Partner labor hourly rate Partner labor hours for job = Partner direct costs of job Associate labor hourly rate Associate labor hours for job = Associate direct costs of job Now determine the formulas you will use to calculate the indirect costs for partners and the indirect costs for associate Requirements Partner labor hours for job Associate indirect cost rate per hour Partner indirect cost rate per hour Associate labor hours for job = Partner indirect costs of job = Associate indirect costs of Now compute the total costs of each job using the multiple direct-cost categories and multiple indirect-cost pools. (Rou Janek Enterprises 1. Compute the costs of the Janek Enterprises and Centura Inc.'s jobs using Casey's further refined system, with multiple direct-cost categories and multiple indirect-cost pools. 2. For what decisions might Casey Associates find it more useful to use this job-costing approach rather than the approaches of a simple costing system or a refined costing sytem with multiple direct-cost categories and one indirect-cost Direct costs: Partner professional labor Associate professional labor Research support labor Computer time Travel and allowances Telephones/faxes Photocopying Total direct costs Indirect costs to be allocated: Indirect costs for partners Indirect costs for associates Total indirect costs Total costs of job More info Print Done Hadlock asks her assistant to collect details on those costs included in the $625,000 indirect-cost pool that can be traced to each individual job. After analysis, Casey is able to reclassify $450,000 of the $625,000 as direct costs: Other Direct Costs Janek Enterprises Centura Inc. Research support labor 37,000 $ 252,500 Computer time 5,000 26,000 Travel and allowances Telephones/faxes Photocopying 11,000 76,000 2,500 19,000 6,500 14,500 $ 62,000 $ 388,000 Total Hadlock decides to calculate the costs of each job as if Casey had used six direct cost-pools and a single indirect-cost pool. The single indirect-cost pool would have $175,000 of costs and would be allocated to each case using the professional labor-hours base. Casey has two classifications of professional staff: partners and associates. Hadlock asks her assistant to examine the relative use of partners and associates on the recent Janek Enterprises and Centura Inc. jobs. The Janek Enterprises job used 1,400 partner-hours and 1,100 associate-hours. The Centura Inc. job used 1,100 partner-hours and 1,400 associate-hours. Therefore, totals of the two jobs together were 2,500 partner-hours and 2,500 associate-hours. Hadlock decides to examine how using separate direct-cost rates for partners and associates and using separate indirect-cost pools for partners and associates would have affected the costs of the Janek Enterprises and Centura Inc. jobs. Indirect costs in each indirect-cost pool would be allocated on the basis of total hours of that category of professional labor. From the total indirect cost-pool of $175,000, $100,000 is attributable to the activities of partners and $75,000 is attributable to the activities of associates. The rates per category of professional labor are as follows: Data table Category of Professional Labor Partner Associate Print Done - 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: Indirect Cost per Hour Direct Cost per Hour 200 $ 150 $75,000 2,500 hours = $30.00 $100,000+ 2,500 hours = $40.00 Professional labor Janek Enterprises 2,500 hours Centura Inc. 2,500 hours Professional labor costs at Casey Associates are $250 an hour. Indirect costs are allocated to cases at $125 an hour. Total indirect costs in the most recent period were $625,000. Casey Associates is a recently formed law partnership. Casey Associates operates at capacity and uses a cost-based approach to pricing (billing) each job. Casey currently uses a simple costing system. (Click the icon to view the data using the simple costing system.) Cindy Hadlock, the managing partner of Casey Associates decided to try and further refine the costing system (Click the icon to view the data.) (Click the icon to view additional information.) Read the requirements. Data table ..... Requirement 1. Compute the costs of the Janek Enterprises and Centura Inc.'s cases using Casey's further refined system, with multiple direct-cost categories and multiple indirect-cost pools. Begin by determining the formulas you will use to calculate the direct partner cost of the job and the direct associate cost of the job. Partner labor hourly rate Partner labor hours for job = Partner direct costs of job Associate labor hourly rate Associate labor hours for job = Associate direct costs of job Now determine the formulas you will use to calculate the indirect costs for partners and the indirect costs for associate Requirements Partner labor hours for job Associate indirect cost rate per hour Partner indirect cost rate per hour Associate labor hours for job = Partner indirect costs of job = Associate indirect costs of Now compute the total costs of each job using the multiple direct-cost categories and multiple indirect-cost pools. (Rou Janek Enterprises 1. Compute the costs of the Janek Enterprises and Centura Inc.'s jobs using Casey's further refined system, with multiple direct-cost categories and multiple indirect-cost pools. 2. For what decisions might Casey Associates find it more useful to use this job-costing approach rather than the approaches of a simple costing system or a refined costing sytem with multiple direct-cost categories and one indirect-cost Direct costs: Partner professional labor Associate professional labor Research support labor Computer time Travel and allowances Telephones/faxes Photocopying Total direct costs Indirect costs to be allocated: Indirect costs for partners Indirect costs for associates Total indirect costs Total costs of job More info Print Done Hadlock asks her assistant to collect details on those costs included in the $625,000 indirect-cost pool that can be traced to each individual job. After analysis, Casey is able to reclassify $450,000 of the $625,000 as direct costs: Other Direct Costs Janek Enterprises Centura Inc. Research support labor 37,000 $ 252,500 Computer time 5,000 26,000 Travel and allowances Telephones/faxes Photocopying 11,000 76,000 2,500 19,000 6,500 14,500 $ 62,000 $ 388,000 Total Hadlock decides to calculate the costs of each job as if Casey had used six direct cost-pools and a single indirect-cost pool. The single indirect-cost pool would have $175,000 of costs and would be allocated to each case using the professional labor-hours base. Casey has two classifications of professional staff: partners and associates. Hadlock asks her assistant to examine the relative use of partners and associates on the recent Janek Enterprises and Centura Inc. jobs. The Janek Enterprises job used 1,400 partner-hours and 1,100 associate-hours. The Centura Inc. job used 1,100 partner-hours and 1,400 associate-hours. Therefore, totals of the two jobs together were 2,500 partner-hours and 2,500 associate-hours. Hadlock decides to examine how using separate direct-cost rates for partners and associates and using separate indirect-cost pools for partners and associates would have affected the costs of the Janek Enterprises and Centura Inc. jobs. Indirect costs in each indirect-cost pool would be allocated on the basis of total hours of that category of professional labor. From the total indirect cost-pool of $175,000, $100,000 is attributable to the activities of partners and $75,000 is attributable to the activities of associates. The rates per category of professional labor are as follows: Data table Category of Professional Labor Partner Associate Print Done - 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: Indirect Cost per Hour Direct Cost per Hour 200 $ 150 $75,000 2,500 hours = $30.00 $100,000+ 2,500 hours = $40.00 Professional labor Janek Enterprises 2,500 hours Centura Inc. 2,500 hours Professional labor costs at Casey Associates are $250 an hour. Indirect costs are allocated to cases at $125 an hour. Total indirect costs in the most recent period were $625,000.
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Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133428704
15th edition
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
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