Pate & Murwick, CPAs, employs 22 professional salaried accountants and 3 hourly administrative staff. The amount billed to clients during the current year differs among the different levels of professional staff. The annual billable hours, costs, rates, and professional staff levels are as follows: The partners estimate the firm will incur variable overhead amounting to 10% of the professional labor cost and fixed overhead amounting to $8 per billable hour of labor. Total selling and administrative are estimated at $114,000 per year, with 60% of this being fixed. The company's proportions of professional accountants, as well as the billing rates, labor costs, overhead, and selling and administrative costs, are expected to remain the same throughout the next year. The firm uses billable hours as its output measure.
a.Determine the total hours that the firm must provide to break-even.
b. How many total hours must the firm bill for managers to break-even?
c. Why do service businesses use different measures of output than retail companies when calculating their break-even point?

Question

Pate & Murwick, CPAs, employs 22 professional salaried accountants and 3 hourly administrative staff. The amount billed to clients during the current year differs among the different levels of professional staff. The annual billable hours, costs, rates, and professional staff levels are as follows:  The partners estimate the firm will incur variable overhead amounting to 10% of the professional labor cost and fixed overhead amounting to $8 per billable hour of labor. Total selling and administrative are estimated at $114,000 per year, with 60% of this being fixed. The company's proportions of professional accountants, as well as the billing rates, labor costs, overhead, and selling and administrative costs, are expected to remain the same throughout the next year. The firm uses billable hours as its output measure. 
a.Determine the total hours that the firm must provide to break-even.
b. How many total hours must the firm bill for managers to break-even?
c. Why do service businesses use different measures of output than retail companies when calculating their break-even point?

Quizplus · Accepted Answer

The Answer of Pate & Murwick, CPAs, employs 22 professional salaried accountants and 3 hourly administrative staff. The amount billed to clients during the current year differs among the different levels of professional staff. The annual billable hours, costs, rates, and professional staff levels are as follows:  The partners estimate the firm will incur variable overhead amounting to 10% of the professional labor cost and fixed overhead amounting to $8 per billable hour of labor. Total selling and administrative are estimated at $114,000 per year, with 60% of this being fixed. The company's proportions of professional accountants, as well as the billing rates, labor costs, overhead, and selling and administrative costs, are expected to remain the same throughout the next year. The firm uses billable hours as its output measure. 
a.Determine the total hours that the firm must provide to break-even.
b. How many total hours must the firm bill for managers to break-even?
c. Why do service businesses use different measures of output than retail companies when calculating their break-even point?

Pate & Murwick, CPAs, Employs 22 Professional Salaried Accountants and 3