L & L,CPAs,employs two full-time professional CPAs and five support employees.Budgeted direct salary costs include $150,000 for each CPA.The 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

To calculate the budgeted direct-cost rate, we add up the budgeted direct salary costs for both CPAs ($150,000 x 2 = $300,000) and divide by the total budgeted CPA-labor-hours (5,000).

Budgeted direct-cost rate = $300,000 ÷ 5,000 = $60 per CPA-labor-hour

To calculate the budgeted indirect-cost rate, we divide the budgeted indirect costs by the total budgeted CPA-labor-hours (5,000).

Budgeted indirect-cost rate = $200,000 ÷ 5,000 = $40 per CPA-labor-hour

Therefore, the answer is B) $60; $40.

L & L,CPAs,employs Two Full-Time Professional CPAs and Five Support