Question

Budgeted professional labor is $200,000. One of the firm's professionals completed work and the customer was billed $45,000 for the professional's labor, $2,000 for materials, and an appropriate amount of overhead. Using a predetermined overhead rate based on the relationship of budgeted overhead and professional labor, what was the total amount of the billing

Answer 1

Answer:

Using a predetermined overhead rate based on the relationship of budgeted overhead and professional labor,

Consider the following annual budgeted overhead for a service industry:

Indirect labor $150,000

Indirect materials 80,000

Photocopying 18,000

Rent and Utilities 16,000

Insurance 6,000

________________________

Total $270,000

Answer : Total bill = $107750

Explanation:

we calculate the overhead rate per $1 for a professional labor and to do that we have to divide the total amount of overhead budgeted for a professional labor by the Budgeted professional labor and that is

= $270000 / $200000 = 1.35

therefore the total amount Billed the customer will comprise of

• The professional labor bill = $45000
• materials bill = $2000
• professional overhead bill = ( $45000 * 1.35 ) = $60750

hence the total bill will be = $45000 + $2000 + $60750

                                           = $107750

Answer 2

Answer:

$107,750

Explanation:

first we have to determine the overhead rate per $1 of professional labor = $270,000 / $200,000 = $1.35 per $1 of professional labor

total billing should include:

• professional fees = $45,000
• direct materials = $2,000
• overhead = ($45,000 x 1.35) = $60,750

total = $107,750