Lucy Cook, CPA, J.D., provides accounting and tax and legal services toher clients. In 2007, she charged $175 per hour for accounting and$200 per hour for tax and legal services. Erin estimates the followingcosts for the year 2008. (35 points) Operating profits declined last year and Ms. Cook has decided to useactivity based costing ABC. procedures to evaluate her hourly fees. Shehas gathered the following information from last year’s records: Required:(a) What is the total cost allocated to Accounting services usingActivity-Based costing ABC.?(b) Lucy wants her hourly fees for the tax and legal services to be200% of their activity-based costs. What is the fee per hour for eachtype of service Lucy offers?(c) A major client has requested accounting services. However, Lucy isalready billing 100% of her capacity (2,000 hours per year) and isreluctant to shift 200 hours away from her tax and legal services tomeet this client’s request. What is the minimum fee per hour that Lucycould charge this client for accounting services and be no worse offthan last year? Assume that Activity-Based Costing ABC. is used.(d) Without regard to your answer in requirement c, assume that Lucymust charge $300 per hour to shift the client’s work from tax and legalservices to accounting services. What would you advise Lucy to do?
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