Pinnacle Consulting employs two CPAs, each having a different area of specialization. Judy specializes in tax consulting and Steve specializes in management consulting. Pinnacle expects to incur total overhead costs of $419,400 during the year and applies overhead based on annual salary costs. Judy is a senior partner, her annual salary is $225,000, and she is expected to bill 2,200 hours during the year. Steve is a senior associate, his annual salary is $124,500, and he is expected to bill 1,500 hours during the year. Required: Calculate the predetermined overhead rate. Assuming that the hourly billing rate should be set to cover the total cost of services plus a 25% markup, compute the hourly billing rates for Judy and Steve.
Pinnacle Consulting employs two CPAs, each having a different area of specialization. Judy specializes in tax consulting and Steve specializes in management consulting. Pinnacle expects to incur total overhead costs of $419,400 during the year and applies overhead based on annual salary costs. Judy is a senior partner, her annual salary is $225,000, and she is expected to bill 2,200 hours during the year. Steve is a senior associate, his annual salary is $124,500, and he is expected to bill 1,500 hours during the year. Required: Calculate the predetermined overhead rate. Assuming that the hourly billing rate should be set to cover the total cost of services plus a 25% markup, compute the hourly billing rates for Judy and Steve.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 6E: Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of...
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Pinnacle Consulting employs two CPAs, each having a different area of specialization. Judy specializes in tax consulting and Steve specializes in management consulting. Pinnacle expects to incur total overhead costs of $419,400 during the year and applies overhead based on annual salary costs. Judy is a senior partner, her annual salary is $225,000, and she is expected to bill 2,200 hours during the year. Steve is a senior associate, his annual salary is $124,500, and he is expected to bill 1,500 hours during the year.
Required:
Calculate the predetermined overhead rate.
Assuming that the hourly billing rate should be set to cover the total cost of services plus a 25% markup, compute the hourly billing rates for Judy and Steve.
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