question archive Adil Arif & Co
Adil Arif & Co
Subject:AccountingPrice:4.87 Bought7
Adil Arif & Co. (AAC) is a full service law firm in Kedah, which is specializing in labor relations and employee-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. The average budgeted total compensation per professional for 2019 is RM97,500. Each professional is budgeted to have 1,500 billable hours to clients in 2019. All professionals work for clients to their maximum 1,500 billable hours available. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. All costs of AAC other than professional labor costs are included in a single indirect-cost pool (legal support) and are allocated to jobs using professional labor-hours as the allocation base. The budgeted level of indirect costs in 2019 is RM2,475,000.
REQUIRED:
(a) Determine the 2019 budgeted direct-cost rate per hour of professional labor. Show all workings.
(b) Determine the 2019 budgeted indirect-cost rate per hour of professional labor. Show all workings.
(c) AAC is considering bidding on two (2) jobs:
Job Raya: Litigation work for Raya Construction Sdn Bhd (RCSB), which requires 120 budgeted hours of professional labor.
Job Perkasa: Labor contract work for Perkasa Development Sdn Bhd (PDSB), which requires 160 budgeted hours of professional labor.
Determine the estimated cost for each Job Raya and Job Perkasa. Show all workings
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Answer:
| a. Computation of budgeted direct-cost rate per hour of professional labor | ||
| Particulars | ||
| No. of professionals (A) | 30 | |
| budgeted total compensation per professional for 2019 (B) | RM 97,500 | |
| Total direct cost (A*B) | RM 2,925,000 | |
| No. of billable hours per professional (C) | 1500 | |
| Total no. of billable hours (A*C) | 45000 | |
| Budgeted Direct cost rate per hour of professional labor | RM 65 | |
| (Total Budgeted direct costs / No. of billable hours) | ||
| b. Computation of budgeted indirect-cost rate per hour of professional labor | ||
| No. of professionals (A) | 30 | |
| budgeted level of indirect costs (B) | RM 2,475,000 | |
| No. of billable hours per professional (C) | 1500 | |
| Total no. of billable hours (A*C) | 45000 | |
| Budgeted Indirect cost rate per hour of professional labor | RM 55 | |
| (Total budgeted indirect costs / No. of billable hours) | ||
| c. Estimated cost for Litigation work for Raya Construction Sdn Bhd (RCSB) | ||
| No. of professional hours | 120 | |
| Total cost per hour | ||
| Direct cost | 65 | |
| Indirect cost | 55 | |
| Total cost per hour | RM 120 | |
| Estimated Cost | RM 14,400 | |
| c. Estimated cost for Labor contract work for Perkasa Development Sdn Bhd (PDSB) | ||
| No. of professional hours | 160 | |
| Total cost per hour | ||
| Direct cost | 65 | |
| Indirect cost | 55 | |
| Total cost per hour | RM 120 | |
| Estimated Cost | RM 19,200 |
