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

183,000

Number of consultations

100 consultations

Administrative Costs

135,000

Admin labor hours

9,000 labor hours

Client Service

91,000

Number of clients

100 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

Answer:

Cost pool Annual estimated cost Cost driver Annual driver quantity Cost per activity Numbers of activity required Cost to be charged Answer $ Consultation 183,000 Number of consultations 100 consultations =183000/100 = 1830 2 =1830*2 = 3,660    3,660.00 Administrative Costs 135,000 Admin labor hours 9000 labor hours =135000/9000 = 15 130 =130*15= 1,950    1,950.00 Client Service 91,000 Number of clients 100 clients =91000/100 = 910 1 =910*1 = 910       910.00 Total    6,520.00

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