Question

The Winter Group (WG) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate) and (b) support services (at 30% of the direct professional costs billed). The three professionals in WG and their rates per professional hour are as follows: (Click the icon to view the hourly rates.) WG has just prepared the May 2017 bills for two clients. The hours of professional time spent on each client are as follows: E: (Click the icon to view the hours by client.) Read the requirements. Requirement 1. What amounts did WG bill to Seattle Dominion and Hong Kong Enterprises for May 2017? Determine the formula needed to calculate the total cost per professional for each client when WG allocates support costs at 30% of direct professional costs. Direct professional labor + ( Support allocation rate X Direct professional labor = Cost per professional Complete the table below to determine the amounts that WG billed to Seattle Dominion and Hong Kong Enterprises for May 2017. Begin with Seattle Dominion. Seattle Dominion Direct Professional Support Amount Billed to Costs Costs Client Mark Winter Abigale Boutin John Atwood Total

Answer 1

1.

Seattle Dominion
	Direct Professional Costs	Support Costs	Amount Billed to client
Mark Winter	$          12,000	$                    3,600	$          15,600
Abigale Boutin	$                850	$                       255	$            1,105
John Atwood	$             3,960	$                    1,188	$            5,148
Total	$          16,810	$                    5,043	$          21,853
Hong Kong Enterprises
	Direct Professional Costs	Support Costs	Amount Billed to client
Mark Winter	$             1,500	$                       450	$            1,950
Abigale Boutin	$             2,210	$                       663	$            2,873
John Atwood	$             5,390	$                    1,617	$            7,007
Total	$            9,100	$                    2,730	$          11,830

2.

Seattle Dominion
	Direct Professional Costs	Support Costs	Amount Billed to client
Mark Winter	$          12,000	$                    1,680	$          13,680
Abigale Boutin	$                850	$                       350	$            1,200
John Atwood	$             3,960	$                    2,520	$            6,480
Total	$          16,810	$                    4,550	$          21,360
Hong Kong Enterprises
	Direct Professional Costs	Support Costs	Amount Billed to client
Mark Winter	$             1,500	$                       210	$            1,710
Abigale Boutin	$             2,210	$                       910	$            3,120
John Atwood	$             5,390	$                    3,430	$            8,820
Total	$            9,100	$                    4,550	$          13,650

Bill to Seatlle domain has decreased while bill to Hong kong enterprises has increased due to change in allocation of support costs.

3.
Professional labor hours is most appropriate allocation base since professional cost per hour for each professional is different which will lead to cost distortion