Mike Kyekyeku is a sole proprietorship that provides consulting and tax preparation services to its clients....

 

Transcribed Image Text:

Mike Kyekyeku is a sole proprietorship that provides consulting and tax preparation services to its clients. Mike charges a fee of $100 per hour for each service and can devote a maximum of 4,000 hours annually to his clients. He reported the following revenues and expenses for 2014: $400,000 Revenue Expenses (All overhead) costs): Secretarial support Supplies Computer costs, etc. Net income (loss) Tax preparation Consulting Total Being an accountant, Mike kept good records of the following data for 2014: (i). Revenue: (ii). Overhead Cost Secretarial unnert Cost Driver Number of cliente $84,000 72,000 48,000 Tax 72 ACTIVITY LEVEL Consulting 204,000 $196,000 48 $130,000 270,000 $400,000 Total 120 ▷ *** Next > (ii). Overhead Cost Secretarial support Supplies Cost Driver clients Tr Answer actions with clients Computer costs. Computer hours etc. Required: Number of Tax 72 ACTIVITY LEVEL Consulting 200 1,000 48 300 600 Total 120 500 1,600 a. Should Mike emphasize one service more than the other if Mike were to allocate all the overhead costs using direct-labours as the only overhead cost driver (1,300 for Tax and 2,700 for Consulting)? Support your decision with the relevant calculations and/or analysis. b. Identify each of the three cost drivers as either unit-level, batch-level, product-level, customer-level, or organization-sustaining. c. How might Mike's product/service emphasis decision in Part a above be altered if he were to allocate all the overhead costs using activity-based costing and the three cost drivers, that is, number of clients, number of transactions with clients, and computer hours? Show all your supporting calculations and/or analysis, including any necessary explanation. Mike Kyekyeku is a sole proprietorship that provides consulting and tax preparation services to its clients. Mike charges a fee of $100 per hour for each service and can devote a maximum of 4,000 hours annually to his clients. He reported the following revenues and expenses for 2014: $400,000 Revenue Expenses (All overhead) costs): Secretarial support Supplies Computer costs, etc. Net income (loss) Tax preparation Consulting Total Being an accountant, Mike kept good records of the following data for 2014: (i). Revenue: (ii). Overhead Cost Secretarial unnert Cost Driver Number of cliente $84,000 72,000 48,000 Tax 72 ACTIVITY LEVEL Consulting 204,000 $196,000 48 $130,000 270,000 $400,000 Total 120 ▷ *** Next > (ii). Overhead Cost Secretarial support Supplies Cost Driver clients Tr Answer actions with clients Computer costs. Computer hours etc. Required: Number of Tax 72 ACTIVITY LEVEL Consulting 200 1,000 48 300 600 Total 120 500 1,600 a. Should Mike emphasize one service more than the other if Mike were to allocate all the overhead costs using direct-labours as the only overhead cost driver (1,300 for Tax and 2,700 for Consulting)? Support your decision with the relevant calculations and/or analysis. b. Identify each of the three cost drivers as either unit-level, batch-level, product-level, customer-level, or organization-sustaining. c. How might Mike's product/service emphasis decision in Part a above be altered if he were to allocate all the overhead costs using activity-based costing and the three cost drivers, that is, number of clients, number of transactions with clients, and computer hours? Show all your supporting calculations and/or analysis, including any necessary explanation.

Answer rating: 100% (QA)

Therefore the profit per hour for tax preparation is 16 while for consul... View the full answer