ACCT 2102 Lecture 2: Accounting - Services, Manufactures and Merchandiser
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John Jones operates an accounting and tax practice. He bills $80per hour for accounting and $150 per hour for tax preparation andrelated services. Jones expects the following costs for nextyear:
Office Supplies | $7,000 |
Rent | $24,000 |
Bookkeeper's salary | $45,000 |
Tax & Accounting Software | $6,000 |
Total | $82,000 |
Having experienced a decline in operating income last year,jones decides to try a new system called activity-based costing todetermine whether he should change his fee structure. He developedthe following data from previous records:
Activity: | Cost Driver: | Accounting | Tax |
Office Supplies | Hours Billed | 1400 | 600 |
Rent | Types of Services offered | 1 | 1 |
Bookkeeper's Salary | Number of Clients | 50 | 200 |
Tax & Accounting Software | Services Billed | 360 | 240 |
Jones feels that he had better not change his accounting billingrate due to competitive pressures. He does feel that he can chargemore for his tax services. He would like to make $150,000 beforetaxes next year. What would he need to bill per hour forhis tax services to achieve this goal?