(2 marks) QUESTION 2 The Inox Group provides tax advice to multinational firms.
ID: 2407605 • Letter: #
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(2 marks) QUESTION 2 The Inox Group provides tax advice to multinational firms. Inox group charges clients for (a) direct professional time (at an hourly rate) and (b) support services (at 30% of the direct professional costs billed) The three professionals at Inox and their rates per professional hour are as follows Professial Billing rate per hour ($) Patricia Saez 300 Maria Jones Janus Parsons 100 150 Inox group has just prepared the Feb 2018 bills for two clients. The hours of professional time spent on each client are as follows Hours per client Professional Patricia Saez Janus Parsons Gravita Ltd 15 Maria Jones Total equired Pondy Ltd 2 8 30 40 40 (a) What amounts did Inox group bill to Gravita Ltd and Pondy Ltd for Feb 2018. (b) Support that support services were billed at $50 per professional labour hour (instead of 30 of professional labour costs). How would this change affect the amounts Inox group billed to the two clients for Feb 2018.Explanation / Answer
a.
b.
c. In the first scenario, the allocation base for support services cost is the total direct professional cost. In the next case, the allocation base for support services cost is the number of total professional labor hours hours for each client.
d. The appropriate allocation base can be determined by the amount of support costs underallocated or overallocated. The most suitable cost driver would be one which gives a very close approximation of the support costs actually incurred.
Gravita Ltd. Pondy Ltd. Patricia Saez $ 4,500 $ 600 Maria Jones 450 1,200 Janus Parsons 2,200 3,000 Total Direct Professional Costs $ 7,150 $ 4,800 Costs for Support Services ( 30 %) 2,145 1,440 Total Amount Billed $ 9,295 $ 6,240Related Questions
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