Question
Clark & Taylor offers website design and consulting services. The company currently allocates its total administrative cost of $270,000 to these two services, using billable
Clark & Taylor offers website design and consulting services. The company currently allocates its total administrative cost of $270,000 to these two services, using billable hours to clients. Consulting services result in 55% of the firms billable hours to clients while website design services result in 45% of billable hours. The company plans to switch to activity-based costing and the following components of administrative cost are identified. Activities Costs Cost Driver Staff Support $200,000 the number of clients served In-house computing charges 50,000 the number of computer hours logged Miscellaneous office costs 20,000 number of client transactions Total $270,000 Website design services make up 35% of the total client base, consumed 30% of the firm's computer hours, and accounted for 10% of the total client transactions. If Clark & Taylor switches from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to website design services would: decrease by $34,500. increase by $34,500 increase by $32,500. decrease by $32,500.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started