13.20 Forrester and Cohen is a small accounting firm, managed by Joseph Cohen si
ID: 407097 • Letter: 1
Question
13.20 Forrester and Cohen is a small accounting firm, managed by Joseph Cohen since the retirement in December of his partner Brad Forrester. Cohen and his 3 CPAs can together bill 640 hours per month. When Cohen or another accountant bills more than 160 hours per month, he or she gets an additional overtime pay of $62.50 for each of the extra hours: This is above and beyond the $5,000 salary each draws during the month. (Cohen draws the same base pay as his employees.) Cohen strongly discourages any CPA from working (billing) more than 240 hours in any given month. The demand for billable hours for the firm over the next 6 months is estimated below: Month Estimate of Billable Hours Jan. 600 Feb. 500 Mar. 1,000 Apr. 1,200 May 650 June 590 Cohen has an agreement with Forrester, his former partner, to help out during the busy tax season, if needed, for an hourly fee of $125. Cohen will not even consider laying off one of his colleagues in the case of a slow economy. He could, however, hire another CPA at the same salary, as business dictates. a) Develop an aggregate plan for the 6-month period. b) Compute the cost of Cohens plan of using overtime and Forrester. c) Should the firm remain as is, with a total of 4 CPAs? 13.21 Refer to the CPA firm in Problem 13.20. In planning for next year, Cohen estimates that billable hours will increase by 10% in each of the 6 months. He therefore proceeds to hire a fifth CPA. The same regular time, overtime, and outside consultant (i.e., Forrester) costs still apply. a) Develop the new aggregate plan and compute its costs. b) Comment on the staffing level with five accountants. Was it a good decision to hire the additional accountant? (Render 538) Render, Jay Heizer and B. Operations Management, 10th Edition. Pearson Learning Solutions.
Explanation / Answer
13.20
Given Information :
Cohen and his 3 CPAs can together bill 640 hours per month
Additional overtime for Cohen or another accountant = Bills more than 160 hours per month
Overtime = pay of $62.50 for each of the extra hours
Base salary = $5,000 salary each draws during the month.(Cohen draws the same base pay as his employees.)
Condition : Cohen strongly discourages any CPA from working (billing) more than 240 hours in any given month.
The demand for billable hours for the firm over the next 6 months is estimated below:
Jan. 600
Feb. 500
Mar. 1,000
Apr. 1,200
May 650
June 590
Cohen has an agreement with Forrester, his former partner, to help out during the busy tax season
For an hourly fee of $125.
No laying off one of his colleagues in the case of a slow economy.
He could, however, hire another CPA at the same salary, as business dictates.
Solution
a) Develop an aggregate plan for the 6-month period.
b) Compute the cost of Cohens plan of using overtime and Forrester
c) Should the firm remain as is, with a total of 4 CPAs?
a) Aggregate plan is developed in above table
b) Cost for 6 months = $ 158125
c) As per mentioned in condition as they are not going to lay of employee in slow down economy .Also the requirements of demands & supply are approximately matching .So theirs is no need to change the employee.
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13.21
Given Information :
billable hours will increase by 10% in each of the 6 months.
He therefore proceeds to hire a fifth CPA. The same regular time, overtime, and outside consultant (i.e., Forrester) costs still apply.
a) Develop the new aggregate plan and compute its costs.
b) Comment on the staffing level with five accountants. Was it a good decision to hire the additional accountant?
Solution :
a) Aggregate plan is developed in above table . Costs : 201500
b) See Now if we compare both the case 13.20 & 13.21
For 13.20 Total Billable hours = 4540 hours
Total Cost = 158125
For 13.21 Total Billable hours = 4994
Total Cost = 201500
So Addition of 1 more accountant is correct , because the billable hours are increased by 454 hours.
Assumption : For both the case 640 monthly capacity is considered.
Month Demand in Hours Jan 600 Feb 500 Mar 1000 Apr 1200 May 650 Jun 590Related Questions
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