Bridges and Lloyd, an accounting ﬁrm, provides consulting and tax planning services.For many years, the ﬁrm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients.A recent analysis found that 65% of the ﬁrm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The ﬁrm, contemplating a change to activity-based costing, has identiﬁed three components of administrative cost, as follows: A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning, 60).In contrast, in-house computing and miscellaneous oﬃce cost varied directly with the number of computer hours logged and number of client transactions, respectively.Consulting consumed 30% of the ﬁrm's computer hours and had 20% of the total client transactions. Assuming the use of activity-based costing, the proper percentage to use in allocating staff support costs to tax planning services is:
A)20%.
B)60%.
C)65%.
D)75%.
E)80%.

Question

Bridges and Lloyd, an accounting ﬁrm, provides consulting and tax planning services.For many years, the ﬁrm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients.A recent analysis found that 65% of the ﬁrm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The ﬁrm, contemplating a change to activity-based costing, has identiﬁed three components of administrative cost, as follows:  A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning, 60).In contrast, in-house computing and miscellaneous oﬃce cost varied directly with the number of computer hours logged and number of client transactions, respectively.Consulting consumed 30% of the ﬁrm's computer hours and had 20% of the total client transactions. Assuming the use of activity-based costing, the proper percentage to use in allocating staff support costs to tax planning services is:
A)20%. 
B)60%. 
C)65%. 
D)75%. 
E)80%.

Quizplus · Accepted Answer

The Answer of Bridges and Lloyd, an accounting ﬁrm, provides consulting and tax planning services.For many years, the ﬁrm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients.A recent analysis found that 65% of the ﬁrm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The ﬁrm, contemplating a change to activity-based costing, has identiﬁed three components of administrative cost, as follows:  A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning, 60).In contrast, in-house computing and miscellaneous oﬃce cost varied directly with the number of computer hours logged and number of client transactions, respectively.Consulting consumed 30% of the ﬁrm's computer hours and had 20% of the total client transactions. Assuming the use of activity-based costing, the proper percentage to use in allocating staff support costs to tax planning services is:
A)20%. 
B)60%. 
C)65%. 
D)75%. 
E)80%.

Bridges and Lloyd, an Accounting ﬁRm, Provides Consulting and Tax