19)A local firm er
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:19)A local firm employs 20 full-time professionals. The budgeted annual compensation per employee is
$81,000. The budgeted average chargeable time is 500 hours per client annually. All professional labor
costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours.
Budgeted indirect costs for the year are $787,500. If the firm expects to have 80 clients during the
coming year, what is the direct labor cost rate per hour:
20) What is the indirect-cost allocation rate for the firm (this is conceptually similar to the O/H allocation
rate for a manufacturer)?
Expert Solution
Step 1
| A | B | C | |
|---|---|---|---|
| 1 |
Particulars
|
Amount
|
|
| 2 |
Budgeted annual compensation
|
81000.00
|
|
| 3 |
Total employee
|
20
|
|
| 4 |
Total compensation
|
1620000.00
|
=81000*20
|
| 5 |
|
|
|
| 6 |
The average chargeable time
|
500
|
|
| 7 |
Expected clients during the coming year
|
80
|
|
| 8 |
Total client hours
|
40000
|
=500*80
|
| 9 |
|
|
|
| 10 |
Direct labor cost per hour
|
40.50
|
=1620000/40000
|
If the firm expects to have 80 clients during the coming year, then the direct labor cost rate is $40.5 per hours.
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