Question

Inse Corporation uses time and material pricing. The repair department expects 20,000 direct labor hours of activity and has the following selected data:
Labor and fringe benefit costs $800,000
Overhead Costs (excludes material handling and storage) 480,000
Target profit 220,000

The company's time charge per hour is:_______

a. $64.
b. $75.
c. $11.
d. $40.
e. $24.

Answer 1

Answer:

b. $75.

Explanation:

The computation of the time charge per hour is shown below;

But before that the total charge is

Labour Charge = $800,000

Overhead Cost = $480,000

Target Profit = $220,000

Total Charge = $1,500,000

Now

time charge per year is

= $1,500,000 ÷ 20,000 direct labor hours

= $75 per year

Hence, the company's time charge per hour is $75 per year

Therefore the correct option is b.