Answer the following questions using the information below:
A local accounting firm employs 20 full-time professionals. The budgeted annual compensation per employee is $40,500. The average chargeable time is 500 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $787,500, and the firm expects to have 90 clients during the coming year.
-What is the budgeted indirect-cost rate per hour?
A) $1,575.00 per hour
B) $78.75 per hour
C) $18.00 per hour
D) $17.50 per hour

Question

Quizplus · Accepted Answer

To calculate the budgeted indirect-cost rate per hour, we need to divide the total budgeted indirect costs for the year by the total budgeted professional labor-hours.

Total budgeted professional labor-hours = 20 full-time professionals x 500 chargeable hours per client x 90 clients = 900,000 hours

Budgeted indirect-cost rate per hour = Budgeted indirect costs / Total budgeted professional labor-hours

Budgeted indirect-cost rate per hour = $787,500 / 900,000 hours = $0.875 per hour or $17.50 per hour (rounded to nearest cent)

Therefore, the best choice is D.

Answer the Following Questions Using the Information Below