L & L, CPAs, employs two full-time professional CPAs and five support employees.Budgeted direct salary costs include $160,000 for each CPA.The support employees are considered as indirect costs, and this cost was budgeted for $200,000 though the actual cost was $225,000.Actual salaries were $155,000 for each CPA.Direct and indirect costs are applied on a CPA-labor-hour basis.Total budgeted CPA-labor-hours were 5,000.If a client used 500 labor-hours, what are the budgeted direct-cost rate and the budgeted indirect-cost rate, respectively?

Question

Quizplus · Accepted Answer

The budgeted direct-cost rate is calculated by dividing the total budgeted direct salary costs by the total budgeted CPA-labor-hours. For the two CPAs, the total budgeted direct salary costs are $160,000 * 2 = $320,000. With 5,000 budgeted CPA-labor-hours, the budgeted direct-cost rate is $320,000 / 5,000 = $64 per labor-hour. The budgeted indirect-cost rate is calculated by dividing the total budgeted indirect costs by the total budgeted CPA-labor-hours. The budgeted indirect costs are $200,000, so the budgeted indirect-cost rate is $200,000 / 5,000 = $40 per labor-hour.

L & L, CPAs, Employs Two Full-Time Professional CPAs and Five