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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
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
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
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