Question

1. Nelson Accounting Partnership uses a job cost system with a cost allocation rate of direct labour hours. At the beginning of year they budgeted total Direct Labour hours to be 20,000. They expect direct labour cost to be $2,800,000. They expect Office Rent to be $400,000, support salaries to be $150,000, utilities to be $95,000, and depreciation on office equipment to be $75,000.

1. Nelson Accounting partnership charges $200 for a simple tax return, which takes an average of 0.75 direct labour hours to complete. What is the total estimated cost for a simple tax return? What is the profit in dollars? As a % of expenses?

2. Nelson Accounting partnership charges $30,000 for a yearly audit on client A. They expect the audit to take 120 direct labour hours to complete. What is the total expect cost for this audit? What is the profit in dollars? As a % of expenses?

3. Should Nelson Accounting partnership focus more on attracting small jobs like those in question a or larger like in question b?

Answer 1

Nelson accounting partnership should focus more on small jobs like those in qusestion a:-