Question

Superior​ Services, Inc. is a consulting firm that offers optimal legal solutions. It allocates indirect costs using a single predetermined overhead allocation rate with direct labor hours as the allocation base. The estimated indirect costs for this year amount to $ 170,000. The company is expected to work 6,000 direct labor hours during the year. The direct labor rate is $ 250 per hour. Clients are billed at 130​% of direct labor cost. Last​ month, Superior's consultants spent 175 hours on​ Xyme, Inc. What is the predetermined overhead allocation rate per direct labor​ hour? (Round your final answer to the nearest whole​ dollar.)

Answer 1

Answer:

The correct answer is $28.

Explanation:

According to the scenario, the given data are as follows:

Estimated indirect cost = $170,000

Direct labor hours = 6,000 hours

Direct hour rate = $250

So, we can calculate the predetermined overhead allocation rate per direct labor​ hour by using following formula:

Predetermined Overhead allocation Rate per direct labor hour = Estimated Indirect cost / Total direct labor hour

= $170,000 / 6000 hours

= $28.33 per hour

= $28 per hour.

Hence, the predetermined overhead allocation rate per direct labor​ hour is $28.