A service business estimates its direct labor costs to be $3,250,000 for the year. The estimated direct labor hours are 50,000. Overhead is allocated based on direct labor hours, and estimated overhead is $800,000 annually. The business desires a 60% markup. Calculate the following: 1. Direct labor rate per hour 2. Predetermined overhead allocation rate 3. Price per hour that it will charge its clients in order to earn the desired markup
A service business estimates its direct labor costs to be $3,250,000 for the year. The estimated direct labor hours are 50,000. Overhead is allocated based on direct labor hours, and estimated overhead is $800,000 annually. The business desires a 60% markup. Calculate the following: 1. Direct labor rate per hour 2. Predetermined overhead allocation rate 3. Price per hour that it will charge its clients in order to earn the desired markup
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A service business estimates its direct labor costs to be $3,250,000 for the
year. The estimated direct labor hours are 50,000. Overhead is allocated
based on direct labor hours, and estimated overhead is $800,000 annually.
The business desires a 60% markup.
Calculate the following:
1. Direct labor rate per hour
2. Predetermined overhead allocation rate
3. Price per hour that it will charge its clients in order to earn the desired
markup
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