Budgeting for a Service Firm Refer to the AccuTax Inc. example in the chapter. One of thepartners is planning to retire at the end of the year. May Higgins, the sole remaining partner, plansto add a manager at an annual salary of $90,000. She expects the manager to work, on average, 45hours a week for 45 weeks per year. She plans to change the required staff time for each hour spentto complete a tax return to the following:Business ReturnComplex IndividualReturnSimple IndividualReturnPartner 0.3 hour 0.05 hour —Manager 0.2 hour 0.15 hour —Senior consultant 0.5 hour 0.40 hour 0.2 hourConsultant — 0.40 hour 0.8 hourThe manager is salaried and earns no overtime pay. Senior consultants are salaried but receivetime and a half for any overtime worked. The firm plans to keep all the senior consultants and adjustthe number of consultants as needed including employing part-time consultants, who also are paidon an hourly basis. Higgins has also decided to have five supporting staff at $40,000 each. All otheroperating data remain unchanged. The manager will share 10% of any profit over $500,000 beforebonus.Required1. What is the budgeted total cost for overtime hours worked by senior consultants?2. How many full-time consultants should be budgeted?3. Determine the manager’s total compensation and total pretax operating income for the firm, assumingthat the revenues from preparing tax returns remain unchanged.
Budgeting for a Service Firm Refer to the AccuTax Inc. example in the chapter. One of the
partners is planning to retire at the end of the year. May Higgins, the sole remaining partner, plans
to add a manager at an annual salary of $90,000. She expects the manager to work, on average, 45
hours a week for 45 weeks per year. She plans to change the required staff time for each hour spent
to complete a tax return to the following:
Business Return
Complex Individual
Return
Simple Individual
Return
Partner 0.3 hour 0.05 hour —
Manager 0.2 hour 0.15 hour —
Senior consultant 0.5 hour 0.40 hour 0.2 hour
Consultant — 0.40 hour 0.8 hour
The manager is salaried and earns no overtime pay. Senior consultants are salaried but receive
time and a half for any overtime worked. The firm plans to keep all the senior consultants and adjust
the number of consultants as needed including employing part-time consultants, who also are paid
on an hourly basis. Higgins has also decided to have five supporting staff at $40,000 each. All other
operating data remain unchanged. The manager will share 10% of any profit over $500,000 before
bonus.
Required
1. What is the budgeted total cost for overtime hours worked by senior consultants?
2. How many full-time consultants should be budgeted?
3. Determine the manager’s total compensation and total pretax operating income for the firm, assuming
that the revenues from preparing tax returns remain unchanged.
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