Fixed costs remain constant at $200 000 per month.During high-output months variable costs are $160 000,and during low-output months variable costs are $40 000.What are the respective high and low indirect-cost rates if budgeted professional labour-hours are 8000 for high-output months and 2000 for low-output months?

Question

Quizplus · Accepted Answer

The indirect-cost rate is calculated by dividing the total costs (fixed + variable) by the budgeted professional labour-hours. For high-output months: ($200,000 + $160,000) / 8000 = $45.00 per hour. For low-output months: ($200,000 + $40,000) / 2000 = $120.00 per hour.

Fixed Costs Remain Constant at $200 000 Per Month