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Bridges and Braun, an accounting firm, provides consulting and tax planning services. Historically the firm's total administrative cost (currently $265,000 ) has been allocated to
Bridges and Braun, an accounting firm, provides consulting and tax planning services. Historically the firm's total administrative cost (currently $265,000 ) has been allocated to services on the basis of billable hours to clients. A recent analysis found that 65% of the firm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows: A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 15; tax planning, 60). In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively. Consulting consumed 30% of the firm's computer hours and had 20% of the total client transactions. If Bridges and Braun switched to an activity-based costing system, the amount of administrative cost chargeable to consulting services would: Multiple Choice decrease by $34,250. increase by $34,250. decrease by $43,500. change by an amount other than those listed. change, but the amount cannot be determined based on the information presented
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