Answer the following questions using the information below:
A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.
-What is the budgeted direct labor cost rate per hour?
A) $18.00 per hour
B) $17.50 per hour
C) $4.05 per hour
D) $2,000 per hour

Question

Quizplus · Accepted Answer

The budgeted direct labor cost rate per hour is calculated by dividing the total annual compensation by the total number of hours worked. Total compensation is $40,500 per employee for 20 employees, which equals $810,000. Total hours worked is 500 hours per client for 90 clients, which equals 45,000 hours. Therefore, the direct labor cost rate is $810,000 / 45,000 hours = $18.00 per hour.

Answer the Following Questions Using the Information Below