Teri Martin Nerdmeister, CPA provides bookkeeping and tax services to her clients. She charges a fee of $60 per hour for bookkeeping and $90 an hour for tax services. Martin estimates the following overhead costs for the upcoming year:
Office Supplies $16,000
Computer fees 24,000
Secretary’s salary 30,000
Rent 18,000
$88,000
Operating profits declined last year and Ms. Martin has decided to use activity based coating (ABC) procedures to evaluate her hourly fees. She gathered the following info from last year’s records:
Activity Cost Driver Bookkeeping Tax Services
Office supplies Hours billed 1,200 800
Computer fees Computer hrs used 400 600
Secretary’s salary Number of clients 16 84
Rent Types of services offered 1 1
What is the toatl overhead allocated to the bookkeeping services using activity based costing?
A. 24,000
B. 33,000
C. 35,000
(Please show how you came up with the answer, I would like to know how to do this. Thanks)