Teri Martin Nerdmeister, CPA provides bookkeeping and tax services to her client

Question

Teri Martin Nerdmeister, CPA provides bookkeeping and tax services to her clients. She charges a fee of $60 per hour for bookkeeping and $90 an hour for tax services. Martin estimates the following overhead costs for the upcoming year:

Office Supplies $16,000

Computer fees 24,000

Secretary's salary 30,000

Rent 18,000

$88,000

Operating profits declined last year and Ms. Martin has decided to use activity based coating (ABC) procedures to evaluate her hourly fees. She gathered the following info from last year's records:

1.     What is the total cost allocated to the bookkeeping services using activity-based costing?

Explanation / Answer

Hi,

Please find the answers as follows:

Part A:

Total cost allocated to the bookkeeping services = 16000/2000*1200 + 24000/1000*400 + 30000/100*16 + 18000/2*1 = $33000

Answer is $33000.

Part B:

Fee Per Hour for Tax Services = (88000 - 33000)/800*160% = $110

Answer is $110.

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.