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:

Support Departments

12

IT Support

$

Admin Support

Facilities Support

Revenue-Generating Departments

Assurance

Tax Advisory

Business Advisory

281.500

712,000

200,550

858.900

617,000

784,800

$3,454,750

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 35:35:30 ratio, (2) Admin Support costs are allocated using a 40:30:30 ratio, and (3) Facilities Support

costs are allocated using a 40:40:20 ratio. 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 9,900, 8,400, and 6,900 hours, respectively, for the quarter.

Required:

places.)

1. Compute the predetermined cost allocation rates for the three revenue-generating departments. (Round your answers to 2 decimal

Predetermined

Cost Allocation

Rate

Assurance

Tax Advisory

Business Advisory

2. Using the rates computed in Requirement (1) above, assign the costs to clients X and Y. Client X required 430, 570 and 690 hours of

professional time, respectively, in the Assurance, Tax Advisory and Business Advisory departments, whereas client Y required 690,

840 and 290 hours of professional time. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.)

05

Client X

Client Y

Assurance Service

Tax Advisor Service

Business Advisory Service

A

$

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:

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

Ouantity

16,350 hours

$

69.53 million

23,820 hours

9,900 hours

8,400 hours

6,900 hours

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

Assurance

Tax Advisor

Business Advisory

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

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:

Resource

IT time (hours)

Sales revenue

Client X

440

$1,464,300

Client Y

240

$976,200

A

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 Advisorv

$

5