Having graduated with honors from his undergraduate accounting program, Adam 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. Adam 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, Adam worked with three clients, in this order: Maple, Points, and Joy. He and his seasoned colleagues spent the following hours on these three clients.

		Maple		Points		Joy
Adam		350		450		550
Others		900		550		450
Total hours		1,250		1,000		1,000

(a)

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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?

Maple		$ 161,250
Points		$116,250
Joy		$108,750

(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.

		Gross margin
Maple		$
Points		$
Joy		$

Answer rating: 100% (QA)

ANSWER Maple 161250 Points 116250 Joy 10875... View the full answer