A law firm uses activity-based pricing. The company’s activity pools are as foll

Question

A law firm uses activity-based pricing. The company’s activity pools are as follows:

Cost Pool

Annual Estimated Cost

Cost Driver

Annual Driver Quantity

Consultation

189,000

Number of consultations

90 consultations

Administrative Costs

145,000

Admin labor hours

9,800 labor hours

Client Service

94,000

Number of clients

110 clients

The firm had two consultations with this client and required 130 administrative labor hours. What additional costs will be charged to this customer?

Cost Pool

Annual Estimated Cost

Cost Driver

Annual Driver Quantity

Explanation / Answer

Additional cost charged to customer = (189,000 x 2/90) + (145,000 x 130/9,800) + (94,000 x 1/110) = $6,978

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