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 4 CPAs together bill 775 hours per month. When Cohen or another accountant bills more than 155 hours per​ month, he or she gets an additional​ "overtime" pay of ​$62.00 for each of the extra​ hours: 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 240 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.                                         671

Feb.                                         561

Mar.                                        1122

Apr.                                         1331

May                                         715

June                                        627

Cohen has an agreement with​ Forrester, his former​ partner, to help out during the busy tax​ season, up to 240 hours in any given month if​ needed, for an hourly fee of $130. 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.

Month	Est. of Billable hours	CPAs	Reg. time billable hours	Reg. time cost	Overtime hours	Overtime cost	Forrester hours	Forrester cost
Jan	671	?	?	?	?	?	?	?
Feb	561	?	?	?	?	?	?	?
Mar	1122	?	?	?	?	?	?	?
Apr	1331	?	?	?	?	?	?	?
May	715	?	?	?	?	?	?	?
Jun	627	?	?	?	?	?	?	?

b) Compute the cost of​ Cohen's plan of using overtime and Forrester.

Total cost= ?

Answer 1

Total Hours	240
Regular Hours	155
Overtime Hours	85
Overtime Pay	$62
Regular Salary	$5,000
Forrester Fee	$130
Max. Forrester Hours	240
Month	Estimate of Billable Hours	CPAs	Reg. time billable hours	Reg. time cost	"Overtime" hours	"Overtime" cost	Forrester hours	Forrester cost
Jan.	671	5	775	$25,000	0	$0	0	$0
Feb.	561	5	775	$25,000	0	$0	0	$0
Mar.	1122	5	775	$25,000	347	$21,514	0	$0
Apr.	1331	5	775	$25,000	425	$26,350	131	$17,030
May	715	5	775	$25,000	0	$0	0	$0
June	627	5	775	$25,000	0	$0	0	$0
				$150,000		$47,864		$17,030
Total cost	$214,894