The Waterston Group (WG) provides tax advice to multinational corporations.WG charges clients for (a) direct professional time
Question:
The Waterston Group (WG) provides tax advice to multinational corporations. WG charges clients for (a) direct professional time (at an hourly rate) and (b) support services (at 30% of invoiced direct professional costs). Here are the three pros and odds per professional hour at WG:
Professional | Hourly Billing Fee |
Myron Waterston | 640 dollars |
Alexa Brown | 180 |
Jeremy Amesbury | 60 |
WG has just prepared May 2011 invoices for two customers. The hours of professional time spent for each client are as follows:
Hours per Customer | ||||
Professional | Seattle Domination | Belize Businesses | ||
Water Stone | 24 | 3 | ||
Brown | 5 | 13 | ||
Amesbury | 36 | 49 | ||
Total | 65 | 65 |
Requirements
1. | How much did WG bill Seattle Dominion and Beliz Enterprises for May 2011? |
2. | Assume support services are billed at $5050 per professional working hour (instead of 30% of professional labor costs). How does this change affect the amounts WG billed to two customers for May 2011? Comment on the differences between the amounts invoiced in Requirements 1 and 2. |
3. | How do you determine which professional labor costs or professional hours are the more appropriate allocation basis for WG support services? |
Requirement 1. How much did WG invoice Seattle Dominion and Beliz Enterprises for May 2011?
Determine the formula needed to calculate the total cost per professional for each client, when WG allocates support costs as 30% of direct professional costs.
+ | ( | X | ) | = | Cost per professional |
Complete the table below to determine the amounts WG has billed to Seattle Dominion and Beliz Enterprises for May 2011. Start with the Seattle Dominion.
Seattle Domination | |||
directly | Amount | ||
Professional | Support | Invoice | |
Costs | Costs | Customer | |
Myron Waterston | |||
Alexa Brown | |||
Jeremy Amesbury | |||
Total |
Belize Businesses | |||
directly | Amount | ||
Professional | Support | Invoice | |
Costs | Costs | Customer | |
Requirement 2. Assume support services are billed at $5050 per professional hour of work (instead of 30% of professional labor costs). How does this change affect the amounts WG has billed to two customers for May 2011? Comment on the differences between the amounts invoiced in Requirements 1 and 2.
When WG allocates support costs at $5050 per professional working hour, determine the formula required to calculate the total cost per professional for each client.
+ | ( | X | ) | = | Cost per professional |
Complete the table below to determine how much WG would have billed Seattle Dominion and Beliz Enterprises for May 2009 if support services were billed at $5050 per professional working hour (rather than 30% of professional labor costs). Start with the Seattle Dominion.
Seattle Domination | |||
directly | Amount | ||
Professional | Support | Invoice | |
Costs | Costs | Customer | |
Myron Waterston | |||
Alexa Brown | |||
Jeremy Amesbury | |||
Total |
Belize Businesses | |||
directly | Amount | ||
Professional | Support | Invoice | |
Costs | Costs | Customer | |
Cost Accounting A Managerial Emphasis
ISBN: 978-0131495388
12th edition
Authors: Charles T. Horngren, Srikant M. Datar, George Foster