A year-end audit conducted for an engineering firm provided the following information. What is the firm's approximate facility capital cost of money (FCCM) on a direct labor basis?ItemItem Cost ($)Cost ($) Item Cost ($) Direct LaborDirect Labor 6,234,6686,234,668 Direct Labor 6,234,668 Allowable fringe benefitsAllowable fringe benefits 3,233,8893,233,889 Allowable fringe benefits 3,233,889 Allowable general overheadAllowable general overhead 8,444,4448,444,444 Allowable general overhead 8,444,444 Facility cost of capital (FCCM)Facility cost of capital (FCCM) 190,000 190,000 Facility cost of capital (FCCM) 190,000
A)32.81%
B)16.2%
C)3)0%
D)None of the above

Question

Quizplus · Accepted Answer

The firm's approximate facility capital cost of money (FCCM) on a direct labor basis is 3.0%.
Solution
Determine the ratio of the facilities capital cost to the cost of direct labor.
FCCM rate = FCCM/direct labor cost
= ($190,000)/($6,234,668)
= 0.03 (3.0%)

A Year-End Audit Conducted for an Engineering Firm Provided the Following