Question

"Compu Services provides computerized inventory consulting. The office and computer expenses are $400,000 annually and are not assigned to specific jobs. The consulting hours available for the year total 20,000, and the average consulting hour has $20 of variable costs."
If the company desires a profit of $140,000, what should it charge per hour?

Answer 1

Answer:

$47

Explanation:

The calculation of charge per hour is shown below:-

Variable cost per hour = $ 20

Unassigned cost per hour = $400,000

Total cost = 20 × $20,000 + $400,000

= $800,000

Profit = $140,000

Total revenue to be collected = $800,000 + $140,000

= $940,000

Per hour charge = Total revenue to be collected ÷ Consulting hours available for the year

= $940,000 ÷ $20,000

= $47