Timlin Associates is a recently formed law partnership. Ellery Hanley, the managing partner of Timlin Associates, has just finished a tense phone call with Martin Offiah, president of Widnes Coal. Offiah strongly complained about the price Timlin charged for some legal work done for Widnes Coal.
Hanley also received a phone call from its only other client, St. Helen€™s Glass, which was very pleased with both the quality of the work and the price charged on its most recent job.
Timlin Associates operates at capacity and uses a cost- based approach to pricing (billing) each job. Cur-rently, 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:

Professional labor costs at Timlin Associates are $ 83 an hour. Indirect costs are allocated to cases at $ 120 an hour. Total indirect costs in the most recent period were $ 25,200.

Required
1. Why is it important for Timlin Associates to understand the costs associated with individual jobs?
2. Compute the costs of the Widnes Coal and St. Helen€™s Glass jobs using Timlin€™s simple costingsystem.

Transcribed Image Text:

Widnes Coal St. Helen's Glass Professional labor 115 hours 95 hours