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BBP,LLC Quality Advisors is a small accounting firm offering quality audits and advising services to small and mid-sized manufacturing firms. Quality audits entail reviewing, checking, and documenting quality practices within a firm. Quality advising entails making recommendations for new or revised quality practices. Other firms in the area offer one or both of these services, although the competition for quality audit jobs is stronger than for quality advising. In addition to senior executives, BBP,LLC employees are either staff or managers. Staff employees are usually younger with less experience. Managers, who oversee the staff on jobs, are more experienced. The average hourly wage is $220 for staff and $550 for managers. (Both staff and managers are paid an annual salary; these hourly costs are based on 2,000 average annual hours worked.) Staff are expected to spend at least 90 percent of their time on billable work. Because of administrative work associated with supervising the staff and the expectation that managers will spend a portion of their time seeking new business, managers are expected to spend about 50 percent of their time on billable work. BBP,LLC employs fifteen staff and five managers. In addition to staff and manager costs, BBP,LLC have estimated that their overhead and administrative costs will be $9,760,000. BBP, LLC bills audit services based on billable hours and advising services at a fixed fee. The cost for audit services is determined by multiplying the billable hours by the quoted employee rates. Staff rates for the following year are $360 per hour and manager rates are $900 per hour. The rates are set to meet the competition in the area. Total revenue at BBP, LLC next year is expected to be $16 million. Total revenue at BBP,LLC next year is expected to be $16 million. The two founding partners of BBP,LLC are looking at these forecasts for next year and trying to decide whether to drop one of these services. "We should probably become more focused, as we sometimes remind our clients." Information on the billable hours is provided on the following page: \begin{tabular}{|l|l|l|l|l|l|l|l|l|} \hline Client 14 & 248 & 55 & 111 & 29 & 359 & 85 \\ \hline Client 15 & 181 & 40 & 138 & & 37 & 319 & 77 \\ \hline Client 16 & 205 & 46 & 177 & & 47 & 382 & 93 \\ \hline Client 17 & 337 & 75 & 146 & & 39 & 483 & 114 \\ \hline Client 18 & 337 & 75 & 168 & & 45 & 505 & 120 \\ \hline Client 19 & 236 & 53 & 256 & 68 & 492 & 121 \\ \hline Client 20 & 309 & 69 & 130 & 34 & 439 & 104 \\ \hline Client 21 & 204 & 46 & 193 & 51 & 397 & 97 \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|l|l|l|l|l|} \hline Client 36 & 257 & 57 & 169 & 45 & 426 & 102 \\ \hline Client 37 & 189 & 42 & 265 & & 70 & 454 & 112 \\ \hline Client 38 & 317 & 71 & 152 & & 40 & 469 & 111 \\ \hline Client 39 & 342 & 76 & 214 & & 57 & 556 & 133 \\ \hline Client 40 & 257 & 57 & 141 & 37 & 398 & 95 \\ \hline Client 41 & 264 & 59 & 201 & 53 & 465 & 112 \\ \hline Client 42 & 212 & 47 & 208 & & 55 & 420 & 103 \\ \hline Client 43 & 286 & 64 & 162 & & 43 & 448 & 107 \\ \hline Client 44 & 261 & 58 & 232 & 62 & 493 & 120 \\ \hline \end{tabular} To determine the cost (not the price) of the job, BBP,LLC currently uses a job costing system. To the employee costs (not the billing rates) is added an amount for overhead based on the predetermined rate and the billable hours in the job. The predetermined rate is based on total expected billable hours. Required: a. What is the predetermined overhead rate for costing jobs in the following year? b. Provide a cost report breakdown (i.e. total cost recorded for audit and for tax) for Client 02 , Client 13, and Client 48. c. What will be the total revenues from audit services next year based on the expected hours and the billing rates? d. Based on the job costing system, what will the reported cost of ALL audit services be next year? e. Based on the job costing system, what will be the cost of ALL tax services? f. What is the expected profit of audit services next year? g. What is the expected profit of tax services next year

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