Job Cost Posting Case

Rebman

This case involves DeLay & Billmore, Ltd., a law firm that provides services to a wide range of clients.

The firm bills its clients based on the amount of professional and paralegal time that is spent on each job. In addition, any out of pocket costs, such as depositions or travel, are charged to the client.

This is a job-shop environment.

December is the first month of the company's business.

Beginning inventories are as follows:

Unbilled client costs

none

Unbilled services in process

none

Overhead consists of office rent, support staff costs, research publications, and other office costs needed to be able to complete legal work. It is projected to be $270,000 for the year.

Direct Labor consists of professional and paralegal time. The firm is projecting billable 4,000 billable hours for the year.

OH is to be allocated on the basis of DL hours.

OH is to be posted at the same time that DL is posted.

The professional staff at the present consists of three people, two attorneys and a paralegal. Their names, compensation rate, and billing rates are shown below. The compensation rate is the salary rate paid to the staff person, and the billing rate is the hourly rate that is used to bill this person's time to clients for work performed.

Name

Position

Compensation Rate per hour

Billing Rate per hour

Able

Attorney

$95.00

$250.00

Baker

Attorney

$95.00

$250.00

Charles

Paralegal

$45.00

$120.00

Job

Client Name

Case Type

2016-1

Dewey, Ketchum & Hyde, Inc

professional liability

2016-2

Norris, Charles (Chuck)

personal injury

2016-3

Crumbwell, Rita

embezzlement

Requirements.

Step

Points

1

10

Calculate the overhead rate to be used for the year. It is based on $ per billable hour. Show your calculations here.

Calculation of OH Rate =

OH Cost total

Driver

OH Rate =

2

25

Post the transactions on the Staff Time Sheets and on the Client Costs Register to the Client Job Records. Use the professional staff compensation rate to post labor costs. Use copy and paste -- don't retype. Also, post the overhead costs at this time.

3

15

Compute the balances in unbilled services and client costs at the end of the month for each job. Enter the balances on the Client Job Records.

4

15

Job 2016-1 and 2016-2 were completed during the month. Prepare invoices as of month-end for the client using the Client Invoice form provided. Consider copy-paste from the job cost record, but be sure to get the correct billing rates. Be sure that the invoice looks professional.

5

5

After the above jobs have been billed, what is the balance of unbilled services at month-end? Show below.

Balance =

6

10

Complete the schedule below and to the right to summarize the costs and revenues from the jobs that were completed during the month. Watch the difference between professional staff labor rates and billing rates. Did the firm earn a profit on these jobs?

7

10

In the space below the schedule of completed jobs, write your comments as to how a job costing system can be applied to a services business. Why is it important for a service-providing firm to use job costing?

8

10

Consider the OH Rate, the professional staff compensation rate, and the billing rate and provide your opinion in the space below as to whether the company's billing rate is too high, too low, or fairly accurate. Do not consider marketing issues, but only the company's cost structure and billing rates.

DeLay & Billmore, Ltd.

Schedule of completed jobs

Month:

December, 2016

Job No.

Client Name

Total Revenues

Total Costs

Profit (Loss)

Comments on profits and the need for a Job Costing System for a services company:

Comments on the company's billing rate:

Staff Time Sheet

Staff Person:

Charles

Client & Job

Date

Description/Comments

Staff Name

Hours

2016-1

5-Dec

telephone meeting with client

Charles

2.50

2016-1

7-Dec

research on case law

Charles

14.00

2016-1

7-Dec

preparation of draft settlement agreement

Charles

2.00

2016-1

7-Dec

revisions to draft settlement agreement

Charles

2.50

2016-1

7-Dec

revisions to draft settlement agreement

Charles

3.50

2016-2

8-Dec

research on case law

Charles

6.00

2016-2

9-Dec

research on case law

Charles

6.00

2016-2

11-Dec

Prepare research summary

Charles

6.50

2016-2

12-Dec

Revision to research summary

Charles

4.00

2016-2

15-Dec

Revision to research summary

Charles

3.00

2016-3

16-Dec

Revisions to agreement

Charles

1.75

2016-3

22-Dec

research on case law

Charles

8.50

2016-3

30-Dec

Court appearance

Charles

2.00

DeLay & Billmore, Ltd.

Client Costs Register

Date

Vendor

Description

Client/Job

Cost

5-Dec

Legal Aid

Research on case

2016-1

$ 1,755.00

15-Dec

Document Services

Document preparation

2016-1

475.00

16-Dec

Fed Ex

overnight mailing

2016-1

45.00

22-Dec

Investigation Services, Inc.

private investigation service and report

2016-2

1,275.00

26-Dec

Client Job Record

Client/Job

Professional Time

Date

Description

Staff Name

Hours

Rate

Total Prof Time or Client Costs

TOTALS

Client Invoice
DeLay & Billmore, Ltd.
Invoice for Professional Services
Client:	SAMPLE COMPANY
Job No:	2016-Sample
Invoice Date:	12/31/2016
For professional services rendered, as follows:
Service Date(s)	Description/Comments	Staff Member	Hours	Rate	Amount
12/1 - 12-5	Able professional time	Jenner	16	250.00	4,000.00
12/8 - 12/19	Baker professional time	Halvorsen	26	120.00	3,120.00
12/15/2016	Deposition cost				1,255.00
12/16/2016	overnight express mail cost				35.00
	TOTAL DUE				8,410.00
Client Invoice
DeLay & Billmore, Ltd.
Invoice for Professional Services
Client:
Job No:
Invoice Date:
For professional services rendered, as follows:
Service Date(s)	Description/Comments	Staff Member	Hours	Rate	Amount
					-
					-
					-
					-
					-
					-
	TOTAL DUE				-
Client Invoice
DeLay & Billmore, Ltd.
Invoice for Professional Services
Client:
Job No:
Invoice Date:
For professional services rendered, as follows:
Service Date(s)	Description/Comments	Staff Member	Hours	Rate	Amount
					-
					-
					-
					-
					-
					-
					-
					-
					-
					-
					-
					-
	TOTAL DUE				-

-

Fed Ex

overnight mailing

2016-2

65.00

62.25