Walters and Witt, a law firm, is analyzing the profitability of its cases. During the year, the firm represented the Umberg Company in numerous routine legal issues, for which it charged a monthly retainer fee of $2,500. Budget information for the firm follows: Partner, associates and paralegal hourly salary rates are $100, $60 and $20, respectively.
Actual time spent for the Umberg cases follows: In addition, the firm incurred $875 in travel costs related to Umberg, but the firm had budgeted for $1,000 of direct costs.
Walters and Witt uses activity-based costing to determine the cost of its cases. With a consultant's help, the firm has developed the following information about cost pools: (a) Compute the budgeted rate per unit of cost driver for each cost pool.
(b) Using activity-based costing, compute the cost of the Umberg work this year.
(c) Compute the profit that Walters and Witt had on the Umberg work this year.

Question

Walters and Witt, a law firm, is analyzing the profitability of its cases. During the year, the firm represented the Umberg Company in numerous routine legal issues, for which it charged a monthly retainer fee of $2,500. Budget information for the firm follows:  Partner, associates and paralegal hourly salary rates are $100, $60 and $20, respectively.
Actual time spent for the Umberg cases follows:  In addition, the firm incurred $875 in travel costs related to Umberg, but the firm had budgeted for $1,000 of direct costs.
Walters and Witt uses activity-based costing to determine the cost of its cases. With a consultant's help, the firm has developed the following information about cost pools:  (a) Compute the budgeted rate per unit of cost driver for each cost pool.
(b) Using activity-based costing, compute the cost of the Umberg work this year.
(c) Compute the profit that Walters and Witt had on the Umberg work this year.

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The Answer of Walters and Witt, a law firm, is analyzing the profitability of its cases. During the year, the firm represented the Umberg Company in numerous routine legal issues, for which it charged a monthly retainer fee of $2,500. Budget information for the firm follows:  Partner, associates and paralegal hourly salary rates are $100, $60 and $20, respectively.
Actual time spent for the Umberg cases follows:  In addition, the firm incurred $875 in travel costs related to Umberg, but the firm had budgeted for $1,000 of direct costs.
Walters and Witt uses activity-based costing to determine the cost of its cases. With a consultant's help, the firm has developed the following information about cost pools:  (a) Compute the budgeted rate per unit of cost driver for each cost pool.
(b) Using activity-based costing, compute the cost of the Umberg work this year.
(c) Compute the profit that Walters and Witt had on the Umberg work this year.

Walters and Witt, a Law Firm, Is Analyzing the Profitability