Mike Kyekyeku Is a Sole Proprietorship That Provides Consulting and Tax

question 65

Essay

Mike Kyekyeku is a sole proprietorship that provides consulting and tax preparation services to its clients.Mike charges a fee of $100 per hour for each service and can devote a maximum of 4,000 hours annually to his clients.He reported the following revenues and expenses for 2014:
Being an accountant,Mike kept good records of the following data for 2014:
(i).
(ii).
Required:
a.Should Mike emphasize one service more than the other if Mike were to allocate all the overhead costs using direct-labours as the only overhead cost driver (1,300 for Tax and 2,700 for Consulting)? Support your decision with the relevant calculations and/or analysis.
b.Identify each of the three cost drivers as either unit-level,batch-level,product-level,customer-level,or organization-sustaining.
c.How might Mike's product/service emphasis decision in Part a above be altered if he were to allocate all the overhead costs using activity-based costing and the three cost drivers,that is,number of clients,number of transactions with clients,and computer hours? Show all your supporting calculations and/or analysis,including any necessary explanation.