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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 IT Support $ 295,000 Admin Support 730,000 Facilities Support 209, 100 Revenue-Generating Departments Assurance 895,800 Tax Advisory 644,000 Business Advisory 812,700 $3,586,600 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 30:40:30 ratio, (2) Admin Support costs are allocated using a 50:20:30 ratio, and (3) Facilities Support costs are allocated using a 35:35:30 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 10,800, 9,300, and 7,800 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 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 Advisory 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 530 $1,488,600 Client Y 330 $992,400 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 $
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