Dillani,Inc.is a consulting firm that offers optimal legal solutions.It allocates indirect costs using a single predetermined overhead allocation rate with direct labor hours as the allocation base.The estimated indirect costs for this year amount to $200,000.The company is expected to work 8,000 direct labor hours during the year.The direct labor rate is $300 per hour.Clients are billed at 120% of direct labor cost.Last month,Dillani's consultants spent 170 hours on Davenport,Inc.Calculate the operating income from Davenport.
A)$51,195
B)$51,000
C)$164,333
D)$5,950

Question

Quizplus · Accepted Answer

D)Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base = $200,000 / 8,000 direct labor hours = $25.00 per DL hour
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