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Dale,Smith,and Associates,a CPA Firm,is Trying to Determine the Hourly Cost

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Essay

Dale,Smith,and Associates,a CPA firm,is trying to determine the hourly cost of its junior accountants in the auditing department.The following data have been gathered.
 Monthly salaries for 4 juniors @ @3,000 each $12,000 Monthly auditing department overhead costs $83,160 Average number of hours worked each month 800hr\begin{array}{lc}\text { Monthly salaries for } 4 \text { juniors @ } @ 3,000 \text { each } & \$ 12,000 \\\text { Monthly auditing department overhead costs } & \$ 83,160 \\\text { Average number of hours worked each month } & 800 \mathrm{hr}\end{array}
Assuming 40 percent of the monthly overhead costs for the auditing department are attributable to the junior accountants,compute the hourly cost of their services.


Definitions:

Required Rate Of Return

The minimum annual percentage return an investor expects to achieve by investing in a particular asset.

Internal Rate Of Return

A metric used in capital budgeting to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Required Discount Rate

The minimum expected rate of return on an investment, used in the discounting process of present value calculations.

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