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19)A local firm er

19)A local firm er

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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)?
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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