<103 of 344 > PROBLEM 5-6 Contrasting ABC and Traditional Product Costs [LO2 - CC3, 6, 7] CHECK FIGURE (4) Total cost assigned to

PROBLEM 5-6 Contrasting ABC and Traditional Product Costs [LO2 - CC3, 6, 7] CHECK FIGURE (4) Total cost assigned to client Y: $117,867 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: IT Support Admin Support Facilities Support Assurance Support Departments $ 402,000 694,000 288,000 Revenue-Generating Departments 548,050 Aa Assurance Tax Advisory Business Advisory Revenue-Generating Departments 548,050 295,000 569,100 $2,796,150 $2,796,150 a Aa 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 30:30:40 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 9,000, 7,500, and 6,000 hours, respectively, for the quarter. Required: Compute the predetermined cost allocation rates for the three revenue-generating departments. 2. Using the rates computed in Requirement (1) above, assign the costs to clients X and Y. Client X required 340, 480, and 600 hours of professional time, respectively, in the Assurance, Tax Advisory, and Business Advisory departments, whereas client Y required 600, 750, and 200 hours of professional time. 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 IT time Sales revenue Cost Driver (allocation base) Allocation Base Quantity 15,000 hours Total professional time Assurance professional time Tax advisory professional time Business advisory professional time Compute the predetermined allocation rate for each activity cost pool. $69.4 million 22,500 hours 9,000 hours 7,500 hours 6,000 hours 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: Activity Cost Pool IT Support Admin Support Facilities Support Assurance Tax Advisory Business Advisory IT time Sales revenue Cost Driver (allocation base) Allocation Base Quantity 15,000 hours Total professional time Assurance professional time Tax advisory professional time Business advisory professional time Compute the predetermined allocation rate for each activity cost pool. $69.4 million 22,500 hours 9,000 hours 7,500 hours 6,000 hours 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: Office Ac... IDM Archives - All P... M Gmail YouTube Maps Compute the predetermined anocation rate for each activity cost poor. 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 Assign the costs to the two clients using activity-based costing. Client X Client Y 350 150 $1,350,000 $900,000 Aa