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The newest partner thinks that the firm might benefit the most from using Activity Based Costing. They have worked out the major components of the

The newest partner thinks that the firm might benefit the most from using Activity Based Costing. They have worked out the major components of the services but need assistance with determining the best options for the process.

The major steps (activities) are as follows:

Client Meeting

Staff and Managers meet with the client to discuss the major events and concern the client may have that could possibly impact their taxes for the current year.

File Collection and Storage

Staff members collect, scan, and file each individual document turned in from the client.

Research

Staff members provide research to tax consequences on new treatments and/or changes in tax law to old treatment of issues to client transactions.

Work Papers

Staff members generate work papers for return. Running calculations with supporting documents and correcting any times noted during the review process.

Review

Managers review the work papers for accuracy and submit any changes.

Data Entry

Staff members generate the final tax return and submit it to the taxing authorities.

Exit Meeting

Staff and Managers meet with the client to discuss the return and any outstanding issues as well as pending items for the next year.

Required

  1. Provide a list of potential cost drivers for each of these activities (the same driver can be reused).
  2. Provide the reason on WHY this is an appropriate cost driver for the activity as well as how the firm would be able to estimate it (i.e. if you used pounds of materials the firm would need to know how many pounds are in the average unit and how many units they expect to make to generate a total estimated pounds.)
  3. Does the use of ABC seem like a good idea for this product line? Why or why not?

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