In June, 20A, after 10 years with a large CPA firm, Anna B. Johnson, CPA, opened an office as a sole practitioner. In 20C, Walter L. Smith, CPA, joined Johnson as a senior accountant. The partnership of Johnson and Smith was organized July 1, 20H, and a fiscal year ending June 30 was adopted and approved by the Internal Revenue Service.
Continued growth of the firm has required additional personnel. The current complement, including approved salaries for the fiscal year ending June 30, 20N, is as follows:

During a severe illness, which kept Johnson away from the office for over 4 months in late 20L, the firm suffered, mainly because other personnel lacked knowledge about the practice. After Johnson's return, a plan was developed for delegation of administrative authority and responsibility and for standardization of procedures. The goals of the plan included income objectives, standardized billing procedures (with flexibility for adjustments by the partners), and assignment schedules to eliminate overtime and to allow for non-chargeable time such as vacations and illness. The firm plans a 52-week year with 5-day, 40-hour weeks.
The partners would like to achieve and annual income target of at least $80,000 (after deducting partners' salaries). The budget for fiscal year 20N is 700 hours of chargeable time at $90 per hour for Johnson and 1,100 hours at $70 for Smith. Johnson and Smith are to devote all other available time, except as specified below, to administration. The billing rates for all other employees including secretaries are to be set at a level to recover their salaries plus the following overhead items: fringe benefits of $35,000, other operating expenses of $62,370, and a contribution to the targeted income of at least $50,000.
The partners agree that salary levels are fair bases for allocating overhead in setting billing rates, with the exception of salary costs of the non chargeable secretarial time, which are to be added to overhead to arrive at total overhead to be allocated. Thus, the billing rates for each secretary will be based on the salary costs of chargeable time plus a share of the total overhead. No portion of total overhead is to be allocated to partners' salaries.
The following information is available for non chargeable time:
(a) Because of the recent illness, Johnson expects to be away an additional week. Smith expects no loss of time from illness. All other employees are to be allowed one illness day per month.
(b) Allowable vacations are as follows:
Johnson .........................1 month (173 hours)
Smith .........................1 month (173 hours)
Vickers .........................3 weeks
Garcia .........................3 weeks
All other employees .........2 weeks
(c) If any of the holidays observed (7 annually) fall on a weekend, the office is closed the preceding Friday or the following Monday.
(d) Kennedy and Quinn should each be allotted 3 days to sit for the CPA examination during the fall of 20N.
(e) Hours are budgeted for other miscellaneous activities of personnel as follows:

(f) Unassigned time should be budgeted for Lowe, Kennedy, and Quinn as 8, 38, and 78 hours, respectively.
Required:
(1) Prepare a time allocation budget for each partner and each employee, beginning with maximum hours available without overtime, and ending with chargeable hours.
(2) Prepare a schedule computing the billing rates for each employee, excluding partners, for the year ending June 30, 20N. The schedule should show the proper allocation of appropriate expenses and should target income contribution to salaries applicable to chargeable time in accordance with the objective established by the partners.
(3) Prepare a condensed budgeted income statement for the year ending June 30, 20N.

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Partners: Anna B. Johnson, CPA....a<..vii... $60,000 40,000 Professional staff: Manager Harold S. Vickers, CPA... 31,200 Senior accountant: 24,960 Staff accountants: James M. Kennedy 20,800 20,800 Viola O. Quinn Secretaries: Livia A. Garcia..a.. Johnnie L. Hammond Mary Lyons 14,560 12,480 12,480 Firm Professional Professional Community Miscellaneous Name Projects Development Meetings Activities Office Time Total 184 120 80 Johnson. Smith Vickers... Lowe. 388 308 240 161 121 1,308 748 848 40 148 24 16 16 12 40 64 89 39 248 16 16 24 Quinn Garcia … 1,000 716 808 16 24