Question

Francis and Hartley Law Office employs 12​ full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional​ labor-hour basis that includes both attorney and paraprofessional hours. Following is information for​ 2018: Budget Actual Indirect costs ​ $270,000 ​$300,000 Annual salary of each attorney ​$100,000 ​$110,000 Annual salary of each paraprofessional ​$29,000 ​$30,000 Total professional​ labor-hours ​50,000 dlh ​60,000 dlh How much should the client be billed in an actual costing system if 220 professional​ labor-hours are​ used? A. ​$8,228 B. ​$7,744 C. ​$7,040 D. ​$5,940

Answer 1

Answer is $7,040

Actual Result:

Indirect costs = $300,000
Annual salary of each attorney = $110,000
Annual salary of each paraprofessional = $30,000
Total professional​ labor-hours = 60,000 dlh

Annual salary of each attorney = $110,000
Total annual salary of attorneys = $110,000 * 12
Total annual salary of attorneys = $1,320,000

Actual salary of attorney per DLH = $1,320,000 / 60,000
Actual salary of attorney per DLH = $22.00

Annual salary of each paraprofessional = $30,000
Total annual salary of paraprofessional = $30,000 * 10
Total annual salary of paraprofessional = $300,000

Actual salary of paraprofessional per DLH = $300,000 / 60,000
Actual salary of paraprofessional per DLH = $5.00

Actual indirect cost per DLH = $300,000 / 60,000
Actual indirect cost per DLH = $5.00

Number of professional labor-hours billed = 220

Total amount billed = (Actual salary of attorney per DLH + Actual salary of paraprofessional per DLH + Actual indirect cost per DLH) * Number of professional labor-hours billed
Total amount billed = ($22.00 + $5.00 + $5.00) * 220
Total amount billed = $32.00 * 220
Total amount billed = $7,040