Eisner and associates provieds consulting and tax preparation services to its cl
ID: 2372758 • Letter: E
Question
Eisner and associates provieds consulting and tax preparation services to its clients it charges a $ 200 fee per hour for each services, the firm's revenu and overhead costs for the year are shown in the following statment
Tax consluting total
Revenu $260000 $ 540000 $ 800000
overhead cost
secretarial support 160000
supplies 80000
computer cost 60000
profit befor direct labor cost $ 500000
the firm uses ABC and the following cost drives
activity level
overhead cost cost drive base tax preparation consulting
secretarial support number of client 72 48
supplies transaction with clients 200 300
computer cost computer hours 1000 600
A compute the income statmet using ABC and three cost driver
b recomput the income statment using direct labor hours as the only allocation base1300 hours for tax and 2700 hours for consulting
c how might firm's decision to be altered if it were allocate all overhead using direct labor hours
d under what circumstance would the labor based allocation and activity based costing (using the three cost driverers ) result in similar profit result
Explanation / Answer
RATE TAXCONSULTING TOTAL ========================================================================================================================================================================================================================================================== REVENUE 260 000 540 000 800 000 ========================================================================================================================================================================================================================================================== LOSS SEC SUPPORT 1333.3 96 000 64 000 160 000 ========================================================================================================================================================================================================================================================== SUPPLIES 160 32 000 48 000 80 000 ========================================================================================================================================================================================================================================================== COSTS 37.5 37 500 22 500 60 000 ========================================================================================================================================================================================================================================================== PROFIST BEFORE DIRECT LABOUR COST 94 500 405 500 500 000 ========================================================================================================================================================================================================================================================== 160 000/120 CLIENTS=1333.3 PER CLIENT ========================================================================================================================================================================================================================================================== 80 000/500 TRANSACTIONS=160 PER TARNSACTIONS ========================================================================================================================================================================================================================================================== 60 000/1600 HOURS=37.50 HOURS ========================================================================================================================================================================================================================================================== 1333.3 X72=96000 DOLLARS ========================================================================================================================================================================================================================================================== 160 X200= 32000 DOLLARS ========================================================================================================================================================================================================================================================== 37.50 HOURS X1000=37 500 DOLLARS ========================================================================================================================================================================================================================================================== PLEASE RATE MY ANSWER WITH FIVE STARS
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