Fixed costs remain constant at $450,000 per month. During high-output months variable costs are $300,000, and during low-out

Question

4 years ago

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Fixed costs remain constant at $450,000 per month. During high-output months variable costs are $300,000, and during low-out

put months variable costs are $125,000. What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 24,000 for high-output months and 5,000 for low-output months?

Business

1 answer:

FrozenT [24] · Answer 1 · 2022-02-19T00:15:39+03:00

Answer:

High indirect-cost rate is $31.25

Low indirect-cost rate is $115

Explanation:

It is noteworthy that the indirect cost-rate refers to the sum of variable cost per hour+fixed cost per hour

High indirect-cost rate=variable cost per hour+fixed cost per hour

High output:

variable cost per hour=total variable costs/number of hours

fixed cost per hour=Fixed costs/number of hours

variable cost per hour=($300,000/24,000)=$12.5

fixed cost per hour =($450,000/24000)=$18.75

high indirect cost-rate=$12.5+$18.75=$31.25

Low output:

variable cost per hour=total variable costs/number of hours

fixed cost per hour=Fixed costs/number of hours

variable cost per hour=($125,000/5,000)=$25.00

fixed cost per hour =($450,000/5,000)=$90

low indirect cost-rate=$25+$90=$115

Fixed costs remain constant at​ $450,000 per month. During​ high-output months variable costs are​ $300,000, and during​ low-out

Fixed costs remain constant at $450,000 per month. During high-output months variable costs are $300,000, and during low-out