Answer the following questions using the information below:
Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours. Following is information for 2014:
$\begin{array}{lcc}&\text { Budget }&\text { Actual }\
\text { Indirect costs } & \$ 200,000 & \$ 300,000 \
\text { Annual salary of each employee } & \$ 100,000 & \$ 110,000 \
\text { Annual salary of each trainee } & \$ 25,000 & \$ 30,000 \
\text { Total professional labor-hours } & 50,000 \mathrm{dlh} & 60,000 \mathrm{dlh}
\end{array}$
-How much should a client be billed in a normal costing system when 1,000 professional labor-hours are used?
A) $33,600
B) $29,800
C) $39,000
D) $41,000

Question

Answer the following questions using the information below:
Mark Papers employs 15 full-time employees and 10 trainees. Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours. Following is information for 2014:
 $\begin{array}{lcc}&\text { Budget }&\text { Actual }\
\text { Indirect costs } & \$ 200,000 & \$ 300,000 \
\text { Annual salary of each employee } & \$ 100,000 & \$ 110,000 \
\text { Annual salary of each trainee } & \$ 25,000 & \$ 30,000 \
\text { Total professional labor-hours } & 50,000 \mathrm{dlh} & 60,000 \mathrm{dlh}
\end{array}$
-How much should a client be billed in a normal costing system when 1,000 professional labor-hours are used?
A) $33,600
B) $29,800
C) $39,000
D) $41,000

Quizplus · Accepted Answer

In a normal costing system, indirect costs are applied using a predetermined rate. The budgeted indirect cost rate is $200,000 / 50,000 dlh = $4 per dlh. The direct cost per hour is calculated by dividing the total salary costs by the total labor hours: [(15 employees * $100,000) + (10 trainees * $25,000)] / 50,000 dlh = $35 per dlh. Thus, the total cost per hour is $35 + $4 = $39. For 1,000 hours, the client is billed 1,000 * $39 = $39,000.

Answer the Following Questions Using the Information Below: Mark Papers

Answer the Following Questions Using the Information Below:
Mark Papers