Answer:
Since cost per hour of full-time employees is $150, while cost per hour of trainees $27, clients using proportionately more full-time employees than trainees will <u>be under billed or charged for the resources or labor hour used</u>.
Explanation:
The data in the question are merged and they are first separated before answering the question as follows:
Details Budget Actual
Indirect costs $250,000 $400,000
Annual salary of each employee $200,000 $250,000
Annual salary of each trainee $40,000 $45,000
Total professional labor-hours 40,000 dlh 50,000 dlh
In normal costing system, actual costs are used.
Therefore, labor hours for each category and cost per hour can be calculated as follows:
Full-time employees total labor hours = (20/30) * 50,000 = 33,333 hours
Each full-time employee annual labor hour = 33,333/20 = 1,667 hours
Cost per hour of full-time employees = $250,000/1,667 = $150 per hour
Trainee total labor hours = (10/30) * 50,000 = 16,667 hours
Each trainee annual labor hours = 16,667/10 = 1,667 hours
Cost per hour of trainees = $45,000/1,667 = $27 per hour
Since cost per hour of full-time employees is $150, while cost per hour of trainees $27, clients using proportionately more full-time employees than trainees will <u>be under billed or charged for the resources or labor hour used</u>.
