Reference no: EM132088020

Question: Wright Associates is a recently formed law partnership. Hugo Higgins?,the managing partner of Wright ?Associates, has just finished a tense phone call with Max Janek?,president of Hazen Coal.Janek strongly complained about the price Wright charged for some legal work done for Hazen Coal.

Higgins also received a phone call from its only other client ?(St. FranSt. Fran?'s ?Glass), which was very pleased with both the quality of the work and the price charged on its most recent job.Wright Associates operates at capacity and uses a?cost-based approach to pricing? (billing) each job. Currently it uses a simple costing system with a single? direct-cost category? (professional labor-hours) and a single?indirect-cost pool? (general support). Indirect costs are allocated to cases on the basis of professional? labor-hours per case. The job files show the? following:

                                 Hazen Coal             St. Fran's Glass

Professional labor          125 hours                   100 hours

Professional labor costs at Wright Associates are $60 an hour. Indirect costs are allocated to cases at $110 an hour. Total indirect costs in the most recent period were $24,750.

Requirements: 1. Why is it important for Wright Associates to understand the costs associated with individual? jobs?

2. Compute the costs of the Hazen Coal and St. FranSt. Fran?'s Glass jobs using Wright?'s simple costing system.

Requirement 1. Why is it important for Wright Associates to understand the costs associated with individual? jobs?

A. Operating at or above capacity for the company lowers overall costs to individual jobs.

B. Pricing decisions are heavily influenced by reported cost numbers.

C. Overstaffing any job would be detrimental to the? company's bottom line.

D. All of the above.