A local engineering firm is bidding on a design project for a new client. The total budgeted direct labour costs for the firm are $800,000. The total budgeted indirect costs are $1,200,000. It is estimated that there are 16,000 billable hours in total.
Required:
a. What is the budgeted direct labour cost rate?
b. What is the budgeted indirect cost allocation rate assuming direct labour cost is the cost allocation base?
c. What should be the engineering firm bid on the project if the direct labour hours are estimated at 500 hours?

Question

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The Answer of A local engineering firm is bidding on a design project for a new client. The total budgeted direct labour costs for the firm are $800,000. The total budgeted indirect costs are $1,200,000. It is estimated that there are 16,000 billable hours in total.
Required:
a. What is the budgeted direct labour cost rate?
b. What is the budgeted indirect cost allocation rate assuming direct labour cost is the cost allocation base?
c. What should be the engineering firm bid on the project if the direct labour hours are estimated at 500 hours?

A Local Engineering Firm Is Bidding on a Design Project