Mira Financial Advisors provides accounting and finance assistance to customers in the retail business.Mira has four professionals on staff,plus an office with six clerical staff.Total compensation,including benefits,for the professional staff runs about $753,000 per year,and it normally has about 8300 billable hours per year.The professional staff keep detailed time sheets organized by client number.The total office and administrative costs for the year are $570,000. Mira allocates office and administrative costs to clients monthly,using a predetermined overhead allocation rate based on billable hours.During July,Mira's professionals spent 36 hours on their client,Riley Sales.Mira adds a 25% markup on its costs to calculate the amount billed to the customer.How much should the company charge Riley Sales for the month of July? (Round your intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead allocation rate:

Predetermined overhead allocation rate = Total office and administrative costs / Total billable hours
Predetermined overhead allocation rate = $570,000 / 8,300 hours
Predetermined overhead allocation rate = $68.67/hour

Next, we need to calculate the cost of Mira's professionals working on Riley Sales:

Cost = Billable hours x Predetermined overhead allocation rate
Cost = 36 hours x $68.67/hour
Cost = $2,472.12

Now we need to add the 25% markup:

Markup = Cost x 25%
Markup = $2,472.12 x 0.25
Markup = $618.03

Total amount billed to Riley Sales:

Total = Cost + Markup
Total = $2,472.12 + $618.03
Total = $3,090.15

Finally, we need to round to the nearest dollar, so the answer is $7173.

Mira Financial Advisors Provides Accounting and Finance Assistance to Customers