A company employs two consultants. Judy specializes in tax consulting and Steve specializes in management consulting. The company expects to incur total overhead costs of $411,600 during the year and applies overhead based on annual salary costs. Judy's annual salary is $220,000, and she is expected to bill 2,000 hours during the year. Steve's annual salary is $123,000, and he is expected to bill 1,500 hours during the year. Required: 1.Calculate the predetermined overhead rate. 2.Assuming that the hourly billing rate should be set to cover the total cost of services plus a 25% markup, compute the hourly billing rates for Judy and Steve.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A company employs two consultants. Judy specializes in tax consulting and Steve specializes in management consulting. The company expects to incur total overhead costs of $411,600 during the year and applies overhead based on annual salary costs. Judy's annual salary is $220,000, and she is expected to bill 2,000 hours during the year. Steve's annual salary is $123,000, and he is expected to bill 1,500 hours during the year.

Required:
1.Calculate the predetermined overhead rate.
2.Assuming that the hourly billing rate should be set to cover the total cost of services plus a 25% markup, compute the hourly billing rates for Judy and Steve.

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