Page 6 of Problem 1) worth 30% m, and How, PC, an accounting firm, is analyzing
ID: 2597993 • Letter: P
Question
Page 6 of Problem 1) worth 30% m, and How, PC, an accounting firm, is analyzing the firm's profitability for the previous year. During the previous year, the firm provided Western Union, the firm's only client, numerous routine accounting services. The firm charged Western Union a monthly retainer fee of S10,000 for these services. The following information represents the fi rm's Budgeted (Projected) Expenses: Services S 500,000 900,000 Bookkeeping Payroll Auditing Total $2,000,000 Overhead: Secretarial Salaries Depreciation of Office Equipment Fringe Benefits Lease Expense Utilities Telecommunications 900,000 300,000 400,000 200,000 300,000 250,000 150,000 S2,500,000 ies Total The following information represents the actual time spent by each professional to provide the firm's services: Partners perform audits Associates prepare payroll 23 hours $100 42 hours@ 60 72 hours 2 Clerks The firm used an activity-based costing system to develop the following cost pools Secretarial Support ringe Benefits prepare accounting records ast Secretarial Salaries fessional Labor Dollars ringe Benefits Professional Labor Dollars epreciation, Lease, Utilities relecommunications, and Supplies Office Support (a) Compute the budgeted rate per unit of cost driver for each cost pool. (b) Using activity-based costing, compute the cost of the firm's work this year (e) Compute the profit that Dewey, Cheatum, and How had on the firm's work this year.Explanation / Answer
DETAILS
COST
$
BASIS
OF ALON
SEC SUPPT
FRINGE BENEFITS
OFFICE
SUPP
SECY SUPP
900000
LABOUR DOLLARS
$900,000/$2000,000= $.45
F BENE
400000
LABOUR DOLLARS
$400,000/$2000,000=
$0.2
OFF SUPP
1200000
LABOUR HOURS
1200,000/46,000=
$26.087
COST
HOURS
AUDITS
$
600,000
/$100
6000
PAYROLL
900,000
/$60
15000
ACC RECORDS
500,000
/$20
25000
$2,000,000
46000
AUDITS
PAYROLL
ACC RECORDS
TOTAL
$
REVENUE
600,000
900,000
500,000
2,000,000
COSTS
SEC SUPPORT
-225,000
-405,000
-270,000
900,000
FRINGE BENEFITS
-120,000
-180,000
-100,000
400,000
OFFICE SUPPORT
-156,522
-391304
-652174
1,200000
PROFIT
+98,478
-76,304
-522,174
-500,000
DETAILS
COST
$
BASIS
OF ALON
SEC SUPPT
FRINGE BENEFITS
OFFICE
SUPP
SECY SUPP
900000
LABOUR DOLLARS
$900,000/$2000,000= $.45
F BENE
400000
LABOUR DOLLARS
$400,000/$2000,000=
$0.2
OFF SUPP
1200000
LABOUR HOURS
1200,000/46,000=
$26.087
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