Question

X Chapter 4 Problem 29E Job order costing and consulting Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of firmwide overhead costs to the labor cost of the consultants on the engagement. The overhead costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Mackenzie Consulting's overhead costs are $5 million per year, and total consultant labor cost is estimated at $2.5 million per year. Required (a) What is Mackenzie Consulting's cost driver rate? (b) If the consultant labor cost on an engagement is $25,000, what cost will Mackenzie Consulting compute as the total cost of the consulting engagement?

I need help with( a). I need to see the formula and answer.

thanks

Answer 1

rate positively ..

Ans 1	Cost driver rate =
		Estimated overhead cost/Estimated consultant labor cost
		5 mil/2.5 mil
		$                  2.00	per direct labor cost
	ans =	$                  2.00	per direct labor cost
Ans 2	Total cost =
	Direct labor cost	$              25,000
	Overhead =25000*2	$              50,000
	Total cost =	$              75,000
	answer =	$              75,000