A law firm uses activity-based pricing.The company's annual activity pools and related information are as follows: $\begin{array}{lrlr}\text { Cost Pool }&\text {Estimated Cost }&\text { Cost Driver }&\text { Driver Quantity }\\hline
\text { Consultation } & \$ 125,000 & \text { Number of consultations } & 200 \text { consultations } \
\text { Administrative costs } & 66,000 & \text { Admin labor hours } & 6,000 \text { labor hours } \
\text { Client service } & 34,000 & \text { Number of clients } & 400 \text { clients }
\end{array}$ The pricing structure is to charge customers for the cost of the services that are provided.The firm had two consultations with Randall's Auto Shop and required 64 administrative labor hours.What additional costs will be charged to this customer?

Question

Quizplus · Accepted Answer

To calculate the additional costs charged to Randall's Auto Shop, we need to calculate the costs associated with the consultations and the administrative labor hours. 1. Consultation cost per consultation = $125,000 / 200 consultations = $625 per consultation.    - For two consultations: 2 * $625 = $1,250.2. Administrative cost per labor hour = $66,000 / 6,000 labor hours = $11 per labor hour.   - For 64 labor hours: 64 * $11 = $704.Adding these two costs together: $1,250 (consultations) + $704 (administrative) = $1,954.However, the correct calculation for the administrative labor hours is as follows:- For 64 labor hours: 64 * $11 = $704.The mistake was in the final addition or choice selection. Correctly adding the costs for consultations and administrative labor hours gives us the total additional costs charged to the customer.- Correct total additional cost: $1,250 (consultations) + $704 (administrative) = $1,954.The correct choice is A, not B, based on the accurate calculations provided.

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