Question
The Wilmer Group (WG) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate) and (b) support
The Wilmer Group (WG) provides tax advice to multinational firms. WG charges clients for
(a) direct professional time (at an hourly rate) and
(b) support services (at 30% of the direct professional costs billed). The three professionals in WG and their rates per professional hour are as follows.
Professional | Billing Rate per Hour |
Mark Wilmer | $500 |
Ashley Bennet | 170 |
John Amesbury | 70 |
The hours of professional time spent on each client are as follows:
Hours per Client | ||
Professional | San Antonio Dominion | Amsterdam Enterprises |
Wilmer | 21 | 3 |
Bennet | 4 | 11 |
Amesbury | 30 | 41 |
Total | 55 | 55 |
1. What amounts did WG bill to San Antonio Dominion and Amsterdam Enterprises for May 2013?
2. Suppose support services were billed at $55 per professional labor-hour (instead of 30% of professional labor costs). How would this change affect the amounts WG billed to the two clients for May 2013? Comment on the differences between the amounts billed in requirements 1 and 2.
3. How would you determine whether professional labor costs or professional labor-hours is the more appropriate allocation base for WG's support services?
Check : Determine the formula needed to calculate the total cost per professional for each client when WG allocates support costs at 30% of direct professional costs.
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