Martin and Beasley,an Accounting Firm,provides Consulting and Tax Planning Services

Multiple Choice

Martin and Beasley,an accounting firm,provides consulting and tax planning services.For many years,the firm's total administrative cost (currently $270,000) has been allocated to services on this basis of billable hours to clients.A recent analysis found that 55% of the firm's billable hours to clients resulted from tax planning services,while 45% resulted from consulting services.
The firm,contemplating a change to activity-based costing,has identified three components of administrative cost,as follows:
A recent analysis of staff support found a strong correlation with the number of clients served.In contrast,in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions,respectively.Consulting clients served totaled 35% of the total client base,consumed 30% of the firm's computer hours,and accounted for 20% of the total client transactions.
If Martin and Beasley switched from its current accounting method to an activity-based costing system,the amount of administrative cost chargeable to consulting services would:

A) decrease by $32,500.
B) increase by $32,500.
C) decrease by $59,500.
D) change by an amount other than those listed above.
E) change,but the amount cannot be determined based on the information presented.