Final answer:
The true statement for job costing at a service firm is that both direct and indirect costs are assigned to client jobs. Direct costs refer to expenses directly tied to serving a client, whereas indirect costs, like office rent, are necessary but not directly assignable to single jobs.
Step-by-step explanation:
Among the options provided for job costing at a service firm, the correct statement is d. Both direct and indirect costs are assigned to client jobs. Direct costs, such as the wages of professional labor, are directly attributable to serving a specific client. In contrast, indirect costs, such as office rent, are not directly tied to a specific client's project but are still necessary for the business's overall operations.
Using the example provided, if Eryn is expecting to earn $200,000 per year, to determine if the legal practice would be profitable, one must calculate the total explicit costs which here includes the office rental for $50,000 per year and the law clerk's salary for $35,000 per year. This sums up to $85,000 in explicit costs. Eryn would then need to consider any implicit costs, such as the opportunity cost of her time, to determine the economic profit.
Therefore, options a, b, and c are incorrect. Office rent for a service firm is an indirect cost, not a direct one. Professional labor cost is considered a direct cost, not an indirect one. The professional billing rate includes more than just the labor cost; it also accounts for overhead and profit margins.