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Social Science Clinic => Accounting => Topic started by: jCorn1234 on Mar 6, 2021

Title: A local CPA employs ten full-time professionals. The budgeted compensation per employee is $50,000. ...
Post by: jCorn1234 on Mar 6, 2021

A local CPA employs ten full-time professionals. The budgeted compensation per employee is $50,000. The maximum billable hours for each client are 400. Clients always receive their full amount of time. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $200,000 and the firm had 20 clients.

Required:

a.	What is the direct-labor-cost rate per hour?

b.	What is the indirect-cost rate per hour?

Title: A local CPA employs ten full-time professionals. The budgeted compensation per employee is $50,000. ...
Post by: Danny Ewald on Mar 6, 2021

a.

Total direct cost

= $50,000 × 10 = $500,000

Total hours

= 400 × 20 = 8,000

Direct-cost rate per unit

= $500,000/8,000 = $62.50 per hour

b.	Indirect-cost rate per unit = $200,000/8,000 = $25.00 per hour