a financial adviser provides each client with three hours rsquo consultation prior t 643424
A financial adviser provides each client with three hours’ consultation prior to arranging a pension plan. The cost of the adviser’s time is estimated at £500 per hour. Advertising costs £2,000 per month. The client is charged £2,100 commission on completion of the three hour sequence of consultation. During one week the financial adviser provides 20 hours of consultation. The statement of costs would be:
|
£ |
||
|
Product cost |
Labour: 20 hours at £500 per hour |
10,000 |
|
Period cost |
Advertising |
2,000 |
Suppose that the consultations are complete for six clients (18 hours) but unfinished for one client, who has been provided with only two hours’ consultation by the end of the week. The incomplete consultation is described as work in progress. There was no work in progress at the start of the week. The calculation of profit would be:
|
£ |
£ |
||
|
Product cost |
Sales (commission) 6 clients at £2,100 each |
12,600 |
|
|
Labour: 20 hours at £500 per hour |
10,000 |
||
|
Less work in progress 2 hours at £500 per hour |
1,000) |
||
|
Product cost of goods sold |
(9,000) |
||
|
Period cost |
Advertising |
(2,000) |
|
|
Operating profit |
1,600 |