Question

The White 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:

Professional                        Billing Rate per Hour
Manny White                        $500
Avery Brown                         $130
Justin Anderson                  $110

WG just prepared the May 2017 Bill's tired two clients. the hours of professional time spent on each client are attached in the photo.

1. What amounts did WG bill to Seattle Dominion and Bejing Enterprises for May 2017?
2. Suppose support services were billed at $60 per professional labor hour (instead of 30% of professional labor costs). How would the change affect the amounts WG billed to the two clients for May 2017? Comment on the differences between the amounts billed in requirements 1 and 2.
3. How would you determine whether professional labor costs or professional labor hours is the more appropriate allocation base for Wag's support services?

                          

Data Table al foi Professional Hours per Client Seattle Dominion Bejing Enterprises White 30 Brown Anderson 44 Total 80 80 Print Done Print Done

Answer 1

1			Settle Dominion		Bejing Enterprises
	Professional	Rate	Hours	Billed	Hours	Billed
	White	$500	30	$15,000	4	$2,000
	Brown	$130	6	$780	16	$2,080
	Anderson	$110	44	$4,840	60	$6,600
			80	$20,620	80	$10,680
	Support Services 30 % of Billed			$6,186		$3,204
	Total Bill amount			$26,806		$13,884
2	Support Services @ $60			$4,800	(80*60)	$4,800
	Billed amount			$25,420		$15,480
	Under requirement 2 the support services amount billed to the both clients are same irrespective of professoinal. Further under requirement 2 support services bill are slighly greater than requirement 1.
3	If support services are directly linked with the hours worked by the professional then it is better to apply professional labor hour else at professional labor cost.