Trainor and Associates is a CPA firm that specializes in helping clients with complex tax problems. The firm charges its clients by applying a markup rate to job costs so that operating income is equal to 15% of revenues. Trainor allocates overhead costs such as computer systems and human resources using a single cost pool with direct labor costs as the allocation base. Direct labor costs consist of the cost for partners at $100 per hour and the cost for associates at $50 per hour. Following is the budget for the current year.

Revenues ............$ 3,500,000

Direct costs: Professional labor ..... 1,000,000

Overhead costs ......... 1,975,000

Operating income ........ $ 525,000

REQUIRED

A. Calculate the overhead cost allocation rate for the current year.

B. A potential client, Max Procrastinator, has asked for a bid for completing his taxes. After examining his documentation, a partner estimates that the work would require 20 hours of partner time and 45 hours of associate time. If the firm wants to earn operating income of 15% of revenues for this client, what will the bid be?