A company currently has 30 full-time employees.Actual time for each employee was as follows: Consumer demand for the company's services is at 100 percent of time available.Each employee receives a salary of $75,000 per year.What is the total actual indirect cost allocation rate if management believes that clients should be charged for the employees' benefits?

Question

A company currently has 30 full-time employees.Actual time for each employee was as follows:  Consumer demand for the company's services is at 100 percent of time available.Each employee receives a salary of $75,000 per year.What is the total actual indirect cost allocation rate if management believes that clients should be charged for the employees' benefits?

Quizplus · Accepted Answer

The total actual indirect cost allocation rate includes the cost of benefits for each employee. Multiplying the number of employees by their annual salary gives us the total cost of salaries for all employees:
30 employees * $75,000/employee = $2,250,000

If we assume that benefits cost 30% of the salary, the total cost of benefits for all employees would be:

$2,250,000 * 30% = $675,000

To calculate the total actual indirect cost allocation rate, we divide the total cost of benefits by the total number of direct labor hours worked by all employees:

$675,000 / (2,000 hours/employee * 30 employees) = $6.00/hour

Therefore, the correct answer is D) $6.00.

A Company Currently Has 30 Full-Time Employees