Question: The Wolfson Group WG provides tax advice to multinational firms

The Wolfson Group (WG) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate), and (b) support services (at 30% of the direct professional costs billed). The three professionals in WG and their rates per professional hour are as follows:
Professional Billing Rate per Hour
Myron Wolfson .............. $600
Naomi Ku ................. 144
John Anderson ............... 96
WG has just prepared the May 2012 bills for two clients. The hours of professional time spent on each client are as follows:
1. What amounts did WG bill to Winnipeg Dominion and Tokyo Enterprises for May 2012?
2. Suppose support services were billed at $60 per professional labour-hour (instead of 30% of professional labour costs). How would this change affect the amounts WG billed to the two clients for May 2012? Comment on the differences between the amounts billed in requirements 1 and 2.
3. How would you determine whether professional labour costs or professional labour-hours is the more appropriate allocation base for WG's support services?

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  • CreatedJuly 31, 2015
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