COVID 19, an accounting firm, provides consulting and tax planning services. For many years, the firms total administrative cost (currently $270,000) has been allocated to services on this basis of billable hours to clients. A recent analysis found that ss% of the firms billable hours to clients resulted from tax planning services, while 45% resulted from consulting services The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows Saff Support $200,000 n-house computing charges 50.000 Miscellaneous office costs 20.000 Total $279.000 A recent analysis of staff support found a strong correlation with the number of clients served In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively Consulting clients served totaled z0% of the total client base, consumed 30% of the firms computer hours and accounted for 35% of the total dient transactions if the firm switched from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to tax planning services would- Select one a. decrease by $59.500 b decrease by $32.500 c decrease by $s8.000 d. decrease by $86.500
COVID 19, an accounting firm, provides consulting and tax planning services. For many years, the firms total administrative cost (currently $270,000) has been allocated to services on this basis of billable hours to clients. A recent analysis found that ss% of the firms billable hours to clients resulted from tax planning services, while 45% resulted from consulting services The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows Saff Support $200,000 n-house computing charges 50.000 Miscellaneous office costs 20.000 Total $279.000 A recent analysis of staff support found a strong correlation with the number of clients served In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively Consulting clients served totaled z0% of the total client base, consumed 30% of the firms computer hours and accounted for 35% of the total dient transactions if the firm switched from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to tax planning services would- Select one a. decrease by $59.500 b decrease by $32.500 c decrease by $s8.000 d. decrease by $86.500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Topic Video
Question
Transcribed Image Text:COVID 19, an accounting firm, provides consulting and tax planning services. For many years, the firms total administrative cost (currently $270,000) has been allocated to services on this basis of billable
hours to clients. A recent analysis found that ss% of the firms billable hours to clients resulted from tax planning services, while 45% resulted from consulting services
The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows
Saff Support
$200,000
n-house computing charges
50.000
Miscellaneous office costs
20.000
Total
$279.000
A recent analysis of staff support found a strong correlation with the number of clients served In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer
hours logged and number of client transactions, respectively Consulting clients served totaled z0% of the total client base, consumed 30% of the firms computer hours and accounted for 35% of the total
dient transactions
if the firm switched from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to tax planning services would-
Select one
a. decrease by $59.500
b decrease by $32.500
c decrease by $s8.000
d. decrease by $86.500
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education