An accounting firm is setting the audit fee for a proposed engagement.The budgeted direct professional labor hours are 100 hours at a rate of $100 per hour.Indirect costs are budgeted at 200% of the direct professional labor cost.Travel costs are budgeted at $20,000.If the markup is 100% of total budgeted costs,what is the audit fee?
A) $30,000
B) $50,000
C) $100,000
D) $640,000

Question

Quizplus · Accepted Answer

Direct labor cost = 100 hours x $100 per hour = $10,000
Indirect costs = 200% of direct labor cost = $20,000
Total budgeted costs = Direct labor cost + Indirect costs + Travel costs = $10,000 + $20,000 + $20,000 = $50,000
Markup = 100% of total budgeted costs = $50,000 x 100% = $50,000
Audit fee = Total budgeted costs + Markup = $50,000 + $50,000 = $100,000. Therefore, the audit fee is option C.

An Accounting Firm Is Setting the Audit Fee for a Proposed