Assg2Q4

4. KV Accounting and Business Consultants provides a variety of consulting services to a diverse range of clients. The company has three support departments and three revenue-generating departments, whose cost details for a typical quarter are presented below: 8 02:18:37 Support Departments IT Support $ 290, 500 Admin Support 724,000 Facilities Support 206, 250 Revenue-Generating Departments Assurance 883,500 Tax Advisory 635,000 Business Advisory 803,400 $3,542,650 eBook The existing cost allocation system is designed as follows: (1) the support department costs are allocated to the three revenue- generating departments, and (2) the revenue-generating department costs are allocated to Individual clients. The support department costs are allocated to the revenue-generating departments as follows: (1) IT Support costs are allocated to Assurance, Tax Advisory, and Business Advisory using a 30:30:40 ratio, (2) Admin Support costs are allocated using a 40:30:30 ratio, and (3) Facilitles Support costs are allocated using a 40:40:20 ratlo. The costs accumulated in the three revenue-generating departments are allocated to Individual clients based on the professional time consumed in the respective department. The Assurance, Tax Advisory, and Business Advisory departments recorded 10,500,9,000, and 7,500 hours, respectively, for the quarter Required: 1. Compute the predetermined cost allocation rates for the three revenue-generating departments. (Round your answers to 2 decimal places.) Predetermined Cost Allocation Rate Assurance Tax Advisory Business Advisory 4 8 02:18:10 2. Using the rates computed In Requirement (1) above, assign the costs to clients X and Y. Client X required 490,630 and 750 hours of professional time, respectively, in the Assurance, Tax Advisory and Business Advisory departments, whereas client Y required 750, 900 and 350 hours of professional time. (Do not round Intermediate calculations. Round your answers to the nearest whole dollar.) Client X Client Y eBook Assurance Service Tax Advisory Service Business Advisory Service S 0 s 0 4 3. You have recently learned about activity-based costing and decide to use six activity cost pools, one for each department. The additional Information you have collected is as follows: 8 02:17:41 Activity Cost Pool IT Support Admin Support Facilities Support Assurance Tax Advisory Business Advisory Cost Driver (allocation base) IT time Sales revenue Total professional time Assurance professional time Tax advisory professional time Business advisory professional time Allocation Base Quantity 17,250 hours $69.62 million 24,720 hours 10,500 hours 9,000 hours 7.5ee hours eBook Compute the predetermined allocation rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool IT Support Admin Support Facilities Support Activity Rate per IT support hour % of sales revenue per hour of professional time per hour of assurance professional time per hour of tax advisory professional time per hour of business advisory professional time Assurance Tax Advisory Business Advisory 8 02:16:57 4. In addition to the Assurance, Tax Advisory, and Business Advisory time specified in Requirement (2) above, the two clients consumed the following additional resources: eBook Resource IT time (hours) Sales revenue Client X 50e $1,480,500 Client Y 3ee $987, eee Assign the costs to the two clients using activity-based costing. (Round Intermediate calculations to 2 decimal places and final answers to the nearest dollar amount.) Client X Client Y IT Support Admin Support Facilities Support Assurance Tax Advisory Business Advisory $ 0 $