Question

ABC has the following information for the current year: Budgeted indirect costs are $4,000, the budgeted allocation base is 2,000 hours. Actual indirect costs incurred were $4,200 and the actual allocation base used was 2,050. What is the budgeted indirect-cost rate?

Answer 1

Answer:

$2 per hour

Explanation:

Given: Budgeted indirect cost $4000

           Budgeted allocation base ; 2000 hours

           Actual indirect costs incurred: $4200

           Actual allocation base : 2050 hours

Standard rate for allocation of indirect cost = Budgeted indirect cost/Budgeted allocation base

= $4000/2000 hrs

= $2 per hour

Budgeted or standard indirect cost rate refers to the estimated indirect cost rate which is arrived at by dividing budgeted expenses by budgeted allocation base i.e budgeted hours here.