Exam 5: Activity-Based Costing and Management

Use the following information to answer the following Questions Bridges and Lloyd, an accounting firm, provides consulting and tax planning services. For many years, the firm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients. A recent analysis found that 65% of the firm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows: A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning, 60). In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively. Consulting consumed 30% of the firm's computer hours and had 20% of the total client transactions. -If Bridges and Lloyd switched from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to consulting services would:

The pool rate is defined as the cost per unit of the cost driver for a particular activity cost pool.

Motor Mike builds recreational motor homes. All of the following activities add value to the finished product except: