Dunby Inc.is a consulting firm that offers optimal legal solutions.It allocates indirect costs using a single plantwide rate with direct labor hours as the allocation base.The estimated indirect costs for this year amount to $150,000.The company is expected to work for 5,000 direct labor hours during the year.The direct labor rate is $250 per hour.Clients are billed at 140% of direct labor cost.Last month,Dunby's consultants spent 175 hours on Xyme Inc.What is the predetermined overhead allocation rate per direct labor hour?
A)$250 per hour
B)$30 per hour
C)$280 per hour
D)$350 per hour

Question

Quizplus · Accepted Answer

To calculate the predetermined overhead allocation rate per direct labor hour, we need to divide the estimated indirect costs by the estimated direct labor hours:
$150,000 ÷ 5,000 = $30 per direct labor hour

Therefore, the correct answer is B. The direct labor rate and the billing rate are not relevant to this calculation.

Dunby IncIs a Consulting Firm That Offers Optimal Legal Solutions