Question

Exercise 9-7
Job Cost for a Client

The partners of Mason and Hutton, attorneys-at-law, decide to implement an activity-based costing system for their firm. They identify the following three cost pools and budgeted amounts for each for the coming year: fringe benefits, $450,000; paralegal support, $250,000; and research support, $650,000. It is determined that the best cost driver for fringe benefits is professional labor dollars ($1,460,000); paralegal support is partner labor hours (4,000); and research support is professional labor hours (20,000).

A client, Jim Adams, requires 10 partner labor hours and 25 professional associate hours from Mason and Hutton, the law firm. Partners are paid $125 per hour, and associates make $60 per hour.

Compute the cost of the Adams' job. Round your interim calculations to two decimal places and your final answer to the nearest cent.
$

Answer 1

Cost pools	Estimated cost E	Cost Driver C	Activity rate E/C
Fringe Benefits	$450,000	$1,460,000	0.31
Paralegal Support	$250,000	4000	62.5
Research Support	$650,000	20000	32.5

Computation of cost of Adam's Job
	No. of hours	Cost per hour	Total Cost N*C
Partners	10	$125	$1,250.00
Professional associate	25	$60	$1,500.00
Overhead			$1,900.00
Frienge Benefit ( 0.31*$1500)			$465.00
Paralegal Support (62.50*10 Hour)			$625.00
Research Support (32.55*25)			$813.75
Total cost of job			$4,649.83