Elite Stationary employs 20 full-time employees and 10 trainees.Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours.Following is information for 2018:

When a normal costing system is used,clients using proportionately more full-time employees than trainees will ________.

Question

Elite Stationary employs 20 full-time employees and 10 trainees.Direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours.Following is information for 2018:

When a normal costing system is used,clients using proportionately more full-time employees than trainees will ________.

Quizplus · Accepted Answer

Since direct and indirect costs are applied on a professional labor-hour basis that includes both employee and trainee hours, clients using proportionately more full-time employees than trainees will be under billed for actual resources used. This is because trainees are less expensive than full-time employees, and if a client uses more full-time employees, they will end up paying for more expensive resources even if they didn't use them proportionately.

Elite Stationary Employs 20 Full-Time Employees and 10 Trainees