Question

ng Company is a consulting firm. The firm expects to have $54,000 in indirect costs during the year and bill customers for 7.500 hours. The cost of direct labor is $65 per hour Calculate the predetermined overhead allocation rate for King using estimated billable hours for the allocation base King completed a consulting job for Sam Henderson and billed the customer for 15 hours. What was the total cost of the consulting job? If King wants to earn a profit equal to 30% of the cost of a job, how much should the company charge Mr. Henderson? Calculate the predetermined overhead allocation rate for King using estimated billable hours for the allocation base, Predetermined overhead allocation rate per hour

Answer 1

1)
Estimated total indirect cost	/	Estimated billable Hours	=	Predetermined Overhead allocation rate
$ 54,000	/	7,500 hours	=	$ 7.20 per hour

2)
King Company Total Cost of the henderson Job
Direct Labor Costs
15 hrs x $ 65 per hour	=	$ 975
Indirect Costs
15 hrs x $ 7.20 per hour	=	$ 108
Total Cost		$ 1,083

3)
Total Cost	$ 1,083
Add: Profit Margin - ( 30% of Cost )	$ 324.90
Required Charge for Job	$ 1,407.90