A year-end audit conducted for an engineering firm provided the following information. What is the firm's calculated overhead rate?
Item Cost ($)
Direct Labor 6,234,668
Allowable fringe benefits 3,233,889
Allowable general overhead 8,444,444
Facility cost of capital (FCCM) 190,000

Question

Quizplus · Accepted Answer

The firm's calculated overhead rate is 187%.
Solution
Use the overhead rate formula.
Overhead rate = (fringe benefit + general overhead)/ direct labor
Overhead rate = ($3,233,889 + $8,444,444)/ $6,234,668
= 1.873 (187%)

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