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ra1l [238]
3 years ago
5

The law firm of smith & jones has a staff of 30 lawyers and administrative staff. Budgeted total costs of the firm total $4,

000,000 of which $2,500,000 is direct-labor costs. Assuming that the remaining costs are indirect and direct-labor cost is the allocation base, calculate the budgeted indirect cost rate.
Business
1 answer:
alex41 [277]3 years ago
4 0

<u>Calculation of the budgeted indirect cost rate:</u>


It is given that budgeted total costs of the firm total $4,000,000 of which $2,500,000 is direct-labor costs. Hence Total Indirect Cost is ($4,000,000-$2,500,000) = $1,500,000


It is also given that direct-labor cost is the allocation base. Hence the allocation rate shall be calculated as follows:


Budgeted indirect cost rate = Total Indirect Cost / Total direct-labor costs


= 1,500,000 / 2,500,000

= 0.6

=60%

Hence the budgeted indirect cost rate is<u> 60% of Direct labor cost. </u>





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