Question

Attorney Maria Conroe uses a job order costing system to collect costs of client engagements. Conroe is currently working on a case for Stacie Olivgra. During the first three months of the year, Conroe logged 152 hours on the Olivgra case.

In addition to direct hours spent by Conroe, her office assistant has worked 35 hours typing and copying 2,320 pages of documents related to the Olivgra case. Conroe’s assistant works 160 hours per month and is paid a salary of $7,680 per month. The average cost per copy is $0.06 for paper, toner, and machine rental. Telephone and fax charges for long-distance calls on the case totaled $232. Last, Conroe has estimated that total office overhead for rent, utilities, parking, and so on amount to $15,360 per month and that, during a normal month, the office is open every hour that the assistant is at work. Overhead charges are allocated to clients based on the number of hours of assistant’s time.

a. Conroe desires to set the billing rate so that she earns, at a minimum, $190 per hour, and covers all direct and allocated indirect costs related to a case. What minimum charge per hour (rounded to the nearest $10) should Conroe charge Olivgra? (Hint: Be sure to include office overhead.) What would be the total billing to Olivgra?

1. Minimum charge per hour	$	per hour
2. Total billing for Olivgra case	$

b. All the hours that Conroe spends at the office are not necessarily billable hours. In addition, Conroe did not consider certain other expenses such as license fees, country club dues, auto mobile costs, and other miscellaneous expenses when she determined the amount of overhead per month. Therefore, Conroe is considering billing clients for direct costs plus allocated indirect costs plus a 40 percent margin to cover nonbillable time as well as other costs. What will Conroe charge Olivgra in total for the time spent on her case?
Note: Round your final answer to the nearest whole dollar.

Answer 1

Minimum charge per hour of conroe
Office overhead cost	$        15,360
Total office working hours	160
overhead/hour(15,360/160)	$                96
Minimum rate for Conroe	$              190
office overhead	$                96
Minimum charge per hour of conroe	$              286
Total billing of olivgra case
Total salary of office assistant	$          7,680
No. of hours working in a month	160
Salary/hour	$                48
Charge for the time spent by conroe (152*286/hour)	$        43,472
Cost of copy (2,320*0.06)	$              139
Charge for the time spent by office assistant (35h*48/hour)	$          1,680
Telephone and fax charges	$              232
	$        45,523
Conroe charge if 40% additional billing for non billing items
Total charge as computed	$        45,523
Add : 40 % additional charge to cover non billable items	$        18,209
	$        63,732