Question
Please use the following information to answer the following question.... - What is the net income for the Corporate client services segment using the three
Please use the following information to answer the following question....
- What is the net income for the Corporate client services segment using the three cost drivers in the ABC model? .
Duwe Chetam and Howe:
The law firm of Duwe, Cheatam and Howe provides legal services for clients. During the year corporate clients required 5,000 hours of legal services, while individuals required 3,000 hours. The firm has traditionally used direct labor hours to assign overheads. However, Ms. Duwe believes services to business clients cost more than services to individuals and is considering an activity-based costing system. The firm's revenues and costs for the year are show below:
| Corporate | Individual | Total | |
| Revenue | $150,000 | $150,000 | $300,000 |
| Expenses: | |||
| Lawyers' salaries | $100,000 | $ 50,000 | $150,000 |
| Overhead: | |||
| Filing | $ 10,000 | ||
| Quality control | $ 5,000 | ||
| Data entry | $ 25,000 | ||
| Total Overhead | $ 40,000 |
Mr. Cheatam has kept records of the following data for use in the activity-based costing system:
| Activity Level | |||
| Overhead Cost | Cost Driver | Corporate | Individual |
| Filing | Number of clients | 5 | 5 |
| Quality control | Number of hours spent | 75 | 25 |
| Data entry | Number of pages entered | 1,000 | 1,500 |
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Foundations Of Cost Control
Authors: Daniel Traster
1st Edition
0132156555, 978-0132156554
