Cloward and Hawkins, CPAs, took in $350,000 of gross revenues this year. Besides themselves, they have two
Question:
Cloward and Hawkins, CPAs, took in $350,000 of gross revenues this year. Besides themselves, they have two professional staff (one manager and one senior accountant) and a full-time secretary. Fixed operating expenses for the office were $50,000 last year. This year, the volume of activity is up 5%, and fixed operating expenses are still $50,000. Total variable operating costs, except for bonuses, average $5 per billable hour. The billable time for all professionals is as follows:
Partners: ......3,000 hours at $75/hour
Manager: .....1,800 hours at $40/hour
Senior accountant: ..2,120 hours at $25/hour
Salaries for the professional staff are $40,000 and $28,000, respectively; the secretary is paid $18,000. The partners each draw salaries of $60,000; plus they share a 5% bonus based on gross revenues. The manager is given a 2% bonus, also based on gross revenues.
Required:
1. Plot the data on a graph clearly showing (a) fixed costs, (b) variable costs, (c) total costs, and (d) total revenues.
2. How much profit did the CPA firm make this year (after partners’ salaries)?
Step by Step Answer:
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain