An Accounting Firm Charges $2500 for an Audit and $350

question 66

Multiple Choice

An accounting firm charges $2500 for an audit and $350 for a tax return.Research and available resources have indicated the following constraints. The firm has 900 hours of staff time available each week.
The firm has 155 hours of review time available each week.
Each audit requires 75 hours of staff time and 10 hours of review time.
Each tax return requires 12.5 hours of staff time and 2.5 hours of review time.
What numbers of audits and tax returns will bring in an optimal revenue?

• A) The optimal revenue of $0 will occurs when 0 audits and no tax returns are processed.
• B) The optimal revenue of $27,200 will occurs when 5 audits and no tax returns are processed.
• C) The optimal revenue of $21,700 will occurs when 62 audits and no tax returns are processed.
• D) The optimal revenue of $30,000 will occurs when 12 audits and no tax returns are processed.
• E) The optimal revenue of $27,200 will occurs when 42 audits and no tax returns are processed.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead cost to products or cost objects, calculated before the accounting period based on estimated costs and activity levels.

Milling Department

A section within a factory or manufacturing facility where materials, such as grains or metals, are ground, cut, or shaped using milling machines.

Customizing Department

A department within a company that modifies products to meet specific customer requirements or preferences.

Predetermined Overhead Rate

An estimated overhead cost rate used to apply manufacturing overhead costs to products, based on expected activity levels.