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Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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
Transcribed Image Text:Forrester and Cohen is a small accounting firm managed by Joseph Cohen since the retirement in December of his partner, Brenda Forrester. Cohen and his 3 CPAs together bill 640 hours per month. When Cohen or another accountant
bills more than 160 hours per month, he or she gets an additional "overtime" pay of $62.50 for each of the extra hours. This is above and beyond the $5,000 salary each draws during the month. (Cohen draws the same base pay as
his employees.) Cohen strongly discourages any CPA from working (billing) more than 250 hours in any given month. The demand for billable hours for the firm over the next 6 months is estimated below.
Month
Jan.
Feb.
Mar
Apr.
Estimate of Billable Hours
600
490
1,010
1,220
660
570
O
May
June
Cohen has an agreement with Forrester, his former partner, to help out during the busy tax season, up to 250 hours in any given month if needed, for an hourly fee of $120. Cohen will not even consider laying off one of his colleagues in the
case of a slow economy. He could, however, hire another CPA at the same salary as business dictates.
a) Develop an aggregate plan for the 6-month period. (Enter your responses as whole numbers). Use regular time, then overtime, then Forrester, and then hire additional CPAs if needed.
O
O
Note: For the CPA column, only include Cohen, his 3 CPAs, and any new CPAs he may hire in your total. DO NOT include Forrester
Month
Estimate of
Billable
Hours
CPAs
Reg. time
billable hours
Reg. time
cost
"Overtime"
hours
Jan.
600
$
"Overtime"
cost
$
Forrester
hours
Forrester
cost
$
Feb
490
$
$
$
Mar.
1,010
$
$
$
Apr.
1,220
$
May
660
$
June
570
$
b) Compute the cost of Cohen's plan of using overtime and Forrester.
The cost of Cohen's plan is $
(Enter your response as a whole number.)
c) Should the firm remain as is with a total of 4 CPAs?
OA. The firm should remain as it is.
OB. The firm should not remain as it is.
OC. One would have to carefully examine the other 6 months to see if hiring is merited.
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