Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. Bilkins has 4 professionals on staff, plus an office with 6 clerical staff. Total compensation, including benefits, for the professional staff runs up to $800,000 per year, and they normally have about 3,200 billable hours per year. Professional staff keeps detailed time sheets organized by client number. The office and administrative costs total $240,000 a year. Bilkins allocates professional time and office and administrative costs to clients monthly, using allocation rates based on billable hours. During July, Bilkins' professionals spent 50 hours on their client, Soupy Sales. Bilkins adds a 30% markup on their costs to calculate the amount billed to the customer. How much gross profit did Bilkins earn from Soupy Sales in July?

Question

Quizplus · Accepted Answer

The cost per billable hour is calculated by dividing the total compensation by the total billable hours: $800,000 / 3,200 = $250 per hour. For 50 hours, the cost is 50 * $250 = $12,500. The office and administrative cost per hour is $240,000 / 3,200 = $75 per hour. For 50 hours, this cost is 50 * $75 = $3,750. Total cost for Soupy Sales is $12,500 + $3,750 = $16,250. With a 30% markup, the billed amount is $16,250 * 1.3 = $21,125. Gross profit is $21,125 - $16,250 = $4,875.

Bilkins Financial Advisors Provides Accounting and Finance Assistance to Customers