A law firm uses activity-based pricing.The company's annual activity pools and related information are as follows: $\begin{array}{lrlr}\text { Cos tPool } &\text { Estimated Cost } &\text { Cost Driver } & \text { Driver Quantity}\\hline
\text { Consultation } & \$ 125,000 & & \text { Number of consultations } \
\text { consultations } & & & \
\text { Administrative costs } & 66,000 & \text { Admin labor hours } & 6,000 \text { labor hours } \
\text { Client service } & 34,000 & \text { Number of clients } & 400 \text { clients }
\end{array}$ The pricing structure is to charge customers for the cost of the services that are provided.The firm had four consultations with Doris Lansing and required 88 administrative labor hours.What additional costs will be charged to this customer?

Question

A law firm uses activity-based pricing.The company's annual activity pools and related information are as follows: $\begin{array}{lrlr}\text { Cos tPool  } &\text { Estimated Cost } &\text { Cost Driver } & \text { Driver Quantity}\\hline
\text { Consultation } & \$ 125,000 & & \text { Number of consultations } \
\text { consultations } & & & \
\text { Administrative costs } & 66,000 & \text { Admin labor hours } & 6,000 \text { labor hours } \
\text { Client service } & 34,000 & \text { Number of clients } & 400 \text { clients }
\end{array}$ The pricing structure is to charge customers for the cost of the services that are provided.The firm had four consultations with Doris Lansing and required 88 administrative labor hours.What additional costs will be charged to this customer?

Quizplus · Accepted Answer

To calculate the additional costs charged to the customer, we need to determine the cost per unit for each cost pool and then apply those rates to the services provided to Doris Lansing.1. **Consultation Costs**: The cost per consultation is not directly given, but since the cost is directly tied to the number of consultations, we can assume it's a fixed rate per consultation. However, without the total number of consultations expected, we cannot calculate this rate or the cost for Doris Lansing's consultations directly from the provided information.2. **Administrative Costs**: The cost per administrative labor hour is calculated by dividing the total estimated cost by the driver quantity.   - $\$66,000 / 6,000 \text{ labor hours} = \$11 \text{ per labor hour}$   - For 88 labor hours: $88 \times \$11 = \$968$3. **Client Service Costs**: Similar to consultation costs, the cost per client is calculated by dividing the total estimated cost by the number of clients.   - $\$34,000 / 400 \text{ clients} = \$85 \text{ per client}$   - Since Doris Lansing is one client, this cost is \$85.Adding the administrative costs and client service costs gives us the additional costs charged to Doris Lansing:- $ \$968 + \$85 = \$1,053$However, none of the provided options match this calculation. Given the options and the information provided, it seems there might be a misunderstanding in the calculation process or an error in the question or options. Based on the information given and standard calculation methods, the correct answer cannot be determined as none of the options match the calculated total of \$1,053. Therefore, the response based on the provided options and calculations would be speculative and likely incorrect.

A Law Firm Uses Activity-Based Pricing The Pricing Structure Is to Charge Customers for the Cost