Forrester and Cohen is a small accounting firm, managed by Joseph Cohen since th
ID: 464822 • Letter: F
Question
Forrester and Cohen is a small accounting firm, managed by Joseph Cohen since the retirement in December of his partner Brad Forrester. Cohen and his 3 CPAs together bill 620 hours per month. When Cohen or another accountant bills more than 155 hours per month, he or she gets an additional "overtime" pay of $64.50 for each of the extrahours: this is above and beyond the $5,000 salary each draws during the month. (Cohen draws the same base pay as his employees.) Cohen strongly discourages any CPA from working (billing) more than 245 hours in any given month. The demand for billable hours for the firm over the next 6 months is estimated below:
Month
Estimate of Billable Hours
Jan.
610
Feb.
490
Mar.
1010
Apr.
1210
May
650
June
590
Cohen has an agreement with Forrester, his former partner, to help out during the busy tax season, up to 245 hours in any given month if needed, for an hourly fee of$135. Cohen will not even consider laying off one of his colleagues in the case of a slow economy. He could, however, hire another CPA at the same salary, as business dictates.
a) Develop an aggregate plan for the 6-month period (enter your responses as whole numbers). Use regular time, then overtime, then Forrester, and then hire additional CPAs if needed.
Note: For the CPA column, only include Cohen, his 3 CPAs, and any new CPAs he may hire in your total. Do NOT include Forrester.
Month---
Estimate of Billable Hours---
CPAs---
Reg. time billable hours---
Reg. time cost---
"Overtime" hours---
"Overtime" cost---
Forrester hours---
Forrester cost
Jan.
?
?
?
?
$?
?
$?
Feb
Mar.
Apr.
May
June
b) Compute the cost of Cohen's plan of using overtime and Forrester.
The cost of Cohen's plan is ? (enter your response as a whole number).
c) Should the firm remain as is, with a total of _____ CPAs?
A.
The firm should not remain as it is.
B.
The firm should remain as it is.
C.
One would have to carefully examine the other 6 months to see if hiring is merited
Month
Estimate of Billable Hours
Jan.
610
Feb.
490
Mar.
1010
Apr.
1210
May
650
June
590
Explanation / Answer
A Month Estimate of Billable hours CPAs Reg. Time Billable hours Reg. Time Cost Overtime Hours Overtime Cost Forrester Hours Forrester Cost a b c = b * 155 d = c * $5000 e = if a-c > 0, then, e = a-c upto 360 hours f = e * $64.50 g = if a-c-e > 0, then, g = a-c-e upto 245 hours h = g * $135 Jan 610 4 620 $20,000.00 0 $0.00 0 $0.00 Feb 490 4 620 $20,000.00 0 $0.00 0 $0.00 Mar 1010 4 620 $20,000.00 360 $23,220.00 30 $4,050.00 Apr 1210 4 620 $20,000.00 360 $23,220.00 230 $31,050.00 May 650 4 620 $20,000.00 30 $1,935.00 0 $0.00 Jun 590 4 620 $20,000.00 0 $0.00 0 $0.00 Total $120,000.00 $48,375.00 $35,100.00 Note 1. Each CPA can work upto 245 hours per month. Regular work hours are 155 hours. So during peak season each can work additionally 90 hours, thereby increasing total hours by 360. 2. In case additional support is required, Forrester can chip in with 245 hours per month. 3. New Hire of CPA will be done in case, Forrester hours are also inadequate to meet to work requirement. B The total cost of Plan is $203,475 Regular Cost $120,000.00 Overtime Cost $48,375.00 Forrester Cost $35,100.00 $203,475.00 C The firm should remain as is with a total of 4 CPAs and One would have to carefully examine the other 6 months to see if hiring is merited