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Martin and Beasley,an Accounting Firm,provides Consulting and Tax Planning Services

question 42

Multiple Choice

Martin and Beasley,an accounting firm,provides consulting and tax planning services.For many years,the firm's total administrative cost (currently $270,000) has been allocated to services on this basis of billable hours to clients.A recent analysis found that 55% of the firm's billable hours to clients resulted from tax planning services,while 45% 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 with the number of clients served.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 clients served totaled 35% of the total client base,consumed 30% of the firm's computer hours,and accounted for 20% of the total client transactions.
If Martin and Beasley switched from its current accounting method to an activity-based costing system,the amount of administrative cost chargeable to consulting services would:

Definitions:

Income Tax Expense

The expense incurred by individuals or corporations due to taxable income, recognized in financial statements.

Corporation

A business organized as a separate legal entity under state corporation law, having ownership divided into transferable shares of stock.

Earnings Per Share

A financial metric that measures the portion of a company's profit allocated to each outstanding share of common stock, presenting a company's profitability.

Stockholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership value in the company.