Question

Forrester and Cohen is a small accounting​ firm, managed by Joseph Cohen since the retirement in December of his partner Brad Forrester. Cohen and his

3

CPAs together bill

640

hours per month. When Cohen or another accountant bills more than

160

hours per​ month, he or she gets an additional​ "overtime" pay of

​$61.30

for each of the extra​ hours: this is above and beyond the

​$4,900

salary each draws during the month.​ (Cohen draws the same base pay as his​ employees.) Cohen strongly discourages any CPA from working​ (billing) more than

245

hours in any given month. The demand for billable hours for the firm over the next 6 months is estimated​ below:

Month	Estimate of Billable Hours
Jan.	620
Feb.	490
Mar.	1,030
Apr.	1,210
May	660
June	580

Cohen has an agreement with​ Forrester, his former​ partner, to help out during the busy tax​ season, up to

245

hours in any given month if​ needed, for an hourly fee of

​$130.

Cohen will not even consider laying off one of his colleagues in the case of a slow economy. He​ could, however, hire another CPA at the same​ salary, as business dictates.

​a) Develop an aggregate plan for the​ 6-month period ​(enter your responses as whole​ numbers). Use regular​ time, then​ overtime, then​ Forrester, and then hire additional CPAs if needed.

​Note: For the CPA​ column, only include​ Cohen, his

3

​CPAs, and any new CPAs he may hire in your total. Do NOT include Forrester.

Month	Estimate of Billable Hours	CPAs	Reg. time billable hours	Reg. time cost	​"Overtime" hours	​"Overtime" cost	Forrester hours	Forrester cost
Jan.	620	nothing	nothing	​$nothing	nothing	​$nothing	nothing	​$nothing

Enter your answer in the edit fields and then click Check Answer.

Answer 1

Aggregate Plan: Particulars Jan Feb Mar Apr May June Total Forecast 620 490 1,030 1,210 660 580 Beginning inventory 0 20 170 0 0 0 Billable Hours required 620 470 860 1,210 660 580 Regular workforce 4 4 4 4 4 4 640 640 640 640 640 640 0 0 220 570 20 0 0 0 0 0 0 0 640 640 860 1,210 660 640 Regular Billable Hours (4 x 160) Overtime Hours (Billable Hours required - Regular Billable Hours) Billable Hours subcontracted to Forrester (Billable Hours required - Regular Billable Hours - Overtime Hours) Total Billed Hours Ending inventory (Total Billed Hours - Billable Hours required) CPA's hired Regular Time cost (Total number of persons x $ 4,900) (in $) Overtime cost (Overtime Hours x $ 61.30) (in %) Forrester cost (Billable Hours subcontracted x $ 130) (in %) Total Cost 20 170 0 0 0 60 0 0 0 0 0 0 19,600 19,600 19,600 19,600 19,600 19,600 117,600 0 0 13,486 34,941 1,226 0 49,653 0 0 0 0 0 0 0 $ 167,253 Total Cost of the Aggregate Plan = $ 167,253.