Reference no: EM132658779

Question - Bridges and Lloyd, an accounting firm, provides consulting and tax planning services. For many years, the firm's total administrative cost (currently $307,000) has been allocated to services on the basis of billable hours to clients. A recent analysis found that 65% of the firm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services.

The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows:

Staff Support $199,000 In-house computing charges 69,000 Miscellaneous office costs 39,000 Total $307,000

A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 15; tax planning, 60). In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively. Consulting consumed 30% of the firm's computer hours and had 15% of the total client transactions.

Assuming the use of activity-based costing, compute the proper percentage to use in allocating staff support costs to tax planning services?

a. 15%.

b. 60%.

c. 65%.

d. 80%.

e. 75%.