P8.9 (LO 1, 2, 3, 4, 5), AN Excel Having graduated with honors from his undergraduate accounting program, Humphrey was feeling like he could take on the world! He was wise enough to recognize that a little bit of real-world experience can go a long way in the business world. So he took the route that many students do, and he got his CPA license and worked in public accounting for several years. During his time at the firm, he dabbled in some consulting projects, helping a few of the managers and partners with some really interesting work. After getting to know one of the clients' businesses quite well, he was offered a full-time position with the company. It was a professional services firm that primarily provides advice on operating efficiency and effectiveness issues. Humphrey couldn't be happier with his decision to move into consulting full-time, as he felt he had the best of both worlds-the manufacturing and professional services settings that both of his parents had exposed him to while growing up. During his first year in this consulting role, Humphrey worked with three clients, in this order: Maple, Points, and Joy. He and his seasoned colleagues spent the following hours on these three clients. Humphrey Others Total hours Maple 300 850 1,150 Points 400 500 900 Joy 500 400 900 Required a. If the consulting firm bills its seasoned staff at $150 per hour and its new staff (those with 1 year or less of experience) at half that rate, how much were each of the clients billed for work this year? b. The consulting firm's costs primarily include labor but also a significant amount of MOH. Fully loaded labor costs run $50/hour for new staff and $80 for seasoned staff (the labor costs include fringe benefits). The MOH rate in use this year is $40 per direct labor hour. Determine the amount of gross margin the consulting firm generated from these three clients this year. c. Describe the trends you see regarding time on task for Humphrey and his colleagues. What do you notice about the trend in gross margin for these clients? e. If the same client work were to be completed in the following year and if Humphrey was then deemed qualified as seasoned staff, how much more gross margin would the consulting firm make?

P8.9 (LO 1, 2, 3, 4, 5), AN Excel Having graduated with honors from his undergraduate accounting program, Humphrey was feeling like he could take on the world! He was wise enough to recognize that a little bit of real-world experience can go a long way in the business world. So he took the route that many students do, and he got his CPA license and worked in public accounting for several years. During his time at the firm, he dabbled in some consulting projects, helping a few of the managers and partners with some really interesting work. After getting to know one of the clients' businesses quite well, he was offered a full-time position with the company. It was a professional services firm that primarily provides advice on operating efficiency and effectiveness issues. Humphrey couldn't be happier with his decision to move into consulting full-time, as he felt he had the best of both worlds-the manufacturing and professional services settings that both of his parents had exposed him to while growing up. During his first year in this consulting role, Humphrey worked with three clients, in this order: Maple, Points, and Joy. He and his seasoned colleagues spent the following hours on these three clients. Humphrey Others Total hours Maple 300 850 1,150 Points 400 500 900 Joy 500 400 900 Required a. If the consulting firm bills its seasoned staff at $150 per hour and its new staff (those with 1 year or less of experience) at half that rate, how much were each of the clients billed for work this year? b. The consulting firm's costs primarily include labor but also a significant amount of MOH. Fully loaded labor costs run $50/hour for new staff and $80 for seasoned staff (the labor costs include fringe benefits). The MOH rate in use this year is $40 per direct labor hour. Determine the amount of gross margin the consulting firm generated from these three clients this year. c. Describe the trends you see regarding time on task for Humphrey and his colleagues. What do you notice about the trend in gross margin for these clients? e. If the same client work were to be completed in the following year and if Humphrey was then deemed qualified as seasoned staff, how much more gross margin would the consulting firm make?

Business Its Legal Ethical & Global Environment

10th Edition

ISBN:9781305224414

Author:JENNINGS

Publisher:JENNINGS

Chapter2: Business Ethics And Social Responsibility

Section: Chapter Questions

Problem 3QAP

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