The Celestial Group (CG) provides financial advice to individuals and corporations. CG charges clients for (a) direct professional time, and (b) support services. The three professionals in CG and their rates per professional hour are as follows:
Billing Rate
Professional per Hour
Sandra Lockheart $250
Jamie Sanders 225
James Liu 200
Monthly support service costs are as follows:
Monthly
Cost
Reception $3,900
Associates 18,750
Clients are charged a standard support service fee of $200 per month.
There is one receptionist who covers the office and spends her time equally on each of the companies sixty clients. The three associate advisors work together on client files. They work a total of 500 hours per month on client accounts. During June they worked a total of 0 hours on the XB Corp file; and, 18 hours on the JN Corp file.
The associates provide support for the professional advisors and give advice to clients on matters that do not require a securities license.
CG has just prepared the June bills for two client corporations owned by the same person.:
XB Corp JN Corp
Sandra Lockheart $ 3,000 $13,750
Jamie Sanders 900 1,350
James Liu 0 1,800
Support Services 200 200
Total $ 4,100 $ 16,900
The owner of the two corporations has questioned the June bill. She is wondering why support services is the same amount when XB Corp required no support service for the month.
Required:
Prepare more appropriate bills for June using the activity-based costing approach.
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