Enlighten Services,Inc. ,a management consulting firm,has been using a single predetermined overhead allocation rate with direct labor hours as the allocation base to allocate overhead costs.The direct labor rate is $50 per hour.Miriam Levy,the president of Enlighten,decided to develop an ABC system to accurately allocate the indirect costs.She identified two activities related to the total indirect costs-travel and information technology (IT)support.The other relevant details are given below:

During the current month,Enlighten's consultants spent 150 labor hours for Malka,Inc.The job required the professionals to travel 450 miles in total.Determine the total cost of the consulting job using the ABC system.(Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar. )

Question

Enlighten Services,Inc. ,a management consulting firm,has been using a single predetermined overhead allocation rate with direct labor hours as the allocation base to allocate overhead costs.The direct labor rate is $50 per hour.Miriam Levy,the president of Enlighten,decided to develop an ABC system to accurately allocate the indirect costs.She identified two activities related to the total indirect costs-travel and information technology (IT)support.The other relevant details are given below:

During the current month,Enlighten's consultants spent 150 labor hours for Malka,Inc.The job required the professionals to travel 450 miles in total.Determine the total cost of the consulting job using the ABC system.(Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar. )

Quizplus · Accepted Answer

D)Travel:
Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base = $90,000 / 1500 miles = $60.00 per mile
Total cost for travel = $60.00 per mile × 450 miles = $27,000.00
IT Support:
Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base = $58,000 / 1400 direct labor hours = $41.43 per DLHr
Total cost for IT support = $41.43 per DLH × 150 hours = $6214.50
Direct labor cost = $50 × 150 hours = $7500
Total cost of job:
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