Job costing with single direct-cost category, single indirect-cost pool, law firm
Bradley Associates is a recently formed law partnershi
1. Pricing decisions at Bradley Associates are heavily influenced by reported cost numbers. Suppose Bradley is bidding against another firm for a client with a job similar to that of Campa Coal. If the costing system overstates the costs of these jobs, Bradley may bid too high and fail to land the client. If the costing system understates the costs of these jobs, Bradley may bid low, land the client, and then lose money in handling the case.
2. Campa St. Edith's
Coal Glass Total
Direct professional labor,
$80 × 150; $80 × 100 $12,000 $ 8,000 $20,000
Indirect costs allocated,
$100 × 150; $100 × 100 15,000 10,000 25,000
Total costs to be billed $27,000 $18,000 $45,000
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