5.Walters and Witt, a law firm, analyzing the profitability of

Question : 5.Walters and Witt, a law firm, analyzing the profitability of : 1416280


5.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:


Professional labor:

Partners$  500,000





Secretarial salaries$   900,000

Depreciation of office equipment300,000

Fringe benefits400,000

Lease expense200,000


Communication expenses250,000

Office supplies150,000


Partner, associates and paralegal hourly salary rates are $100, $60 and $20, respectively.


Actual time spent for the Umberg cases follows:


Partners23 hours

Associates42 hours

Paralegals72 hours


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:


Cost Pool    Expenses Included    Cost Allocation Base

Secretarial supportSecretarial salariesPartner labor hours

Fringe benefitsFringe benefitsProfessional labor dollars


Office supportDepreciation, lease, utilities, communications and supplies

Professional labor hours


(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.




5 (1 Ratings )

Accounting 1 Month Ago 508 Views
This Question has Been Answered!
Unlimited Access Free
Explore More than 2 Million+
  • Textbook Solutions
  • Flashcards
  • Homework Answers
  • Documents
Signup for Instant Access!
Ask an Expert
Our Experts can answer your tough homework and study questions
150417 Accounting Questions Answered!
Post a Question