*THIS IS THE LAST PART OF THE QUESTION- THE IMAGE ARE THE FIRST PART THIS IS THE ENDING*A&R bills audit services based on billable hours and advising services at a fixed fee. The cost for audit services is determined by multiplying the billable hours by the quoted employee rates. Staff rates for the following year are $370 per hour and manager rates are $925 per hour. The rates are set to meet the competition in the area.To determine the cost (not the price) of the job. A&R uses a job costing system. To the employee costs (not the billing rates) is added an amount for overhead based on the predetermined rate and the billable hours in the job. The predetermined rate is based on expected billable hours.Total revenue at A&R next year is expected to be $16 million.The two founding partners of A&R are looking at these forecasts for next year and trying to decide whether to drop one of these services. "We should probably become more focused, as we sometimes remind our clients."Required:a. What is the predetermined overhead rate for costing jobs in the following year?b. How much will Client 02 be billed for audit services next year?c. How much will the job costing system report as the cost of Client 02 audit services next year?d. What will be the total revenues from audit services next year based on the expected hours and the billing rates?e. Based on the job costing system, what will the reported cost of audit services be next year?f. Based on the job costing system, what will be the cost of advisory services?g. What is the expected profit of audit services next year?h. What is the expected profit of advisory services next year? A&R Quality Advisors is a small consulting firm offering quality audits and advising services to small and mid-sized manufacturing firms.Quality audits entail reviewing, checking, and documenting quality practices within a firm. Quality advising entails makingrecommendations for new or revised quality practices. Other firms in the area offer one or both of these services, although thecompetition for quality audit jobs is stronger than for quality advising.In addition to senior executives, A&R employees are either staff or managers. Staff employees are usually younger with lessexperience. Managers, who oversee the staff on jobs, are more experienced. The average hourly wage is $230 for staff and $575 formanagers. (Both staff and managers are paid an annual salary: these hourly costs are based on 2,000 average annual hours worked.)Staff are expected to spend at least 90 percent of their time on billable work. Because of administrative work associated withsupervising the staff and the expectation that managers will spend a portion of their time seeking new business, managers areexpected to spend about 50 percent of their time on billable work. A&R employs ten staff and two managers.In addition to staff and manager costs, A&R has overhead and administrative costs of $8,308,000, of which about $2,769,000 isvariable with respect to billable hours. Overhead and administrative costs include the non-billable cost of the staff and managers.Selected information on billable hours expected for the next year follow. Billable AuditBillableTotal BillableAdvising HoursStaff Manager Staff Manager Staff ManagerHoursHoursClient18446234444189001Clientз844з844e2Client254641144936811303Client7436743649Client334542344956810350Total 10, 20a2,900 11,2002,500 21,40e5,400

Hi student Since there are multiple subparts, we will answer only first three subparts.

THIS IS THE LAST PART OF THE QUESTION- THE IMAGE ARE THE FIRST PART THIS IS THE ENDING* A&R bills audit services based on billable hours and advising services at a fixed fee. The cost for audit services is determined by multiplying the billable hours by the quoted employee rates. Staff rates for the following year are $370 per hour and manager rates are $925 per hour. The rates are set to meet the competition in the area. To determine the cost (not the price) of the job. A&R uses a job costing system. To the employee costs (not the billing rates) is added an amount for overhead based on the predetermined rate and the billable hours in the job. The predetermined rate is based on expected billable hours. Total revenue at A&R next year is expected to be $16 million. The two founding partners of A&R are looking at these forecasts for next year and trying to decide whether to drop one of these services. "We should probably become more focused, as we sometimes remind our clients." Required: a. What is the predetermined overhead rate for costing jobs in the following year? b. How much will Client 02 be billed for audit services next year? c. How much will the job costing system report as the cost of Client 02 audit services next year?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter14: Quality And Environmental Cost Management

Section: Chapter Questions

Problem 35P: Recently, Ulrich Company received a report from an external consulting group on its quality costs....

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*THIS IS THE LAST PART OF THE QUESTION- THE IMAGE ARE THE FIRST PART THIS IS THE ENDING*

A&R bills audit services based on billable hours and advising services at a fixed fee. The cost for audit services is determined by multiplying the billable hours by the quoted employee rates. Staff rates for the following year are $370 per hour and manager rates are $925 per hour. The rates are set to meet the competition in the area.

To determine the cost (not the price) of the job. A&R uses a job costing system. To the employee costs (not the billing rates) is added an amount for overhead based on the predetermined rate and the billable hours in the job. The predetermined rate is based on expected billable hours.

Total revenue at A&R next year is expected to be $16 million.

The two founding partners of A&R are looking at these forecasts for next year and trying to decide whether to drop one of these services. "We should probably become more focused, as we sometimes remind our clients."

Required:

a. What is the predetermined overhead rate for costing jobs in the following year?

b. How much will Client 02 be billed for audit services next year?

c. How much will the job costing system report as the cost of Client 02 audit services next year?

d. What will be the total revenues from audit services next year based on the expected hours and the billing rates?

e. Based on the job costing system, what will the reported cost of audit services be next year?

f. Based on the job costing system, what will be the cost of advisory services?

g. What is the expected profit of audit services next year?

h. What is the expected profit of advisory services next year?