Question

Elite Stationary employs 20 fulltime employees and 10 trainees. Direct and indirect costs are applied on a professional laborhour basis that includes both employee and trainee hours. Following is information for​ 2020: Budget Actual Indirect costs ​$200,000 ​$300,000 Annual salary of each employee ​$100,000 ​$110,000 Annual salary of each trainee ​$25,000 ​$30,000 Total professional laborhours ​50,000 dlh ​60,000 dlh How much should a client be billed in a normal costing system when​ 1,400 professional laborhours are​ used?

Answer 1

Answer:

$114,338

Explanation:

The computation of the amount that should be billed when 1,400 professional labor hours used

But before that determine the actual per hour salary and budgeted indirect cost per hour

Actual per hour salary

= Total actual salary ÷ Total actual professional hours

= ($110,000 × $20 + $30,000× 10) ÷ (60,000)

= ($2,200,000 + $300,000) ÷ (60,000)

= $41.67

And, the budgeted indirect cost per hour is

= $200,000 ÷ $50,000

= $40

Now the amount that should be billed is

= 1,400 hours × ($41.67 + $40)

= $114,338