Smith and Baker Legal Services employs 6 full-time attorneys and 10 paraprofessionals. Budgeted salaries are $420,000 for each attorney and $140,000 for each paraprofessional. Budgeted indirect costs (e.g., rent, secretarial support, copying, etc.) are $980,000. The company traces the cost of attorney and paraprofessional time to each client and uses the total to assign indirect costs. What amount of indirect cost would be assigned if services to a client required $30,000 of attorney cost and $25,000 of paraprofessional cost

Indirect cost for client is $13,750

Explanation:

Budgeted salaries = ($420,000 * 6) + ($140,000 * 10)

Budgeted salaries =  $2,520,000 + $1,400,000

Budgeted salaries = $3,920,000

Budgeted indirect costs given = $980,000

Cost for client = $30,000 + $25,000

Cost for client =$55,000

Indirect cost for client is:

= $980,000 *  ($55,000 / $3,920,000)

= $980,000 * 0.014031

= $13,750.38

= $13,750

True Statements are:

B, C, D

Explanation:

All the capital cost incurred for an asset acquisition is added to the cost of capital asset.

The cost of capital asset here will include the following,

Replacement of wiring will not form part of cost of building, as is associated with fittings and computers, so either it will be clubbed in furniture and fittings or computers,

Replacement of roof is a part of building and shall be added to cost of building.

Painting, plumbing etc: will not form part of cost of building, as will be added to revenue expenditure and not the capital expenditure.

Thus with the above clarification of nature of expense, Statement B, C, and D are true.