Answer the following questions using the information below:

A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.

Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.

-What is the budgeted direct labor cost rate per hour?

Question

Answer the following questions using the information below:

A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.

Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.

-What is the budgeted direct labor cost rate per hour?

Quizplus · Accepted Answer

The budgeted direct labor cost rate per hour is calculated by dividing the total budgeted annual compensation for all employees by the total chargeable hours. Total annual compensation is 20 employees * $40,500 = $810,000. Total chargeable hours are 20 employees * 500 hours = 10,000 hours. Therefore, the rate is $810,000 / 10,000 hours = $81 per hour.

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