Answer:
1. Hourly Direct Labor Cost rate = Direct Labor cost / Direct Labor hours
Hourly Direct Labor Cost rate = 2,500,000 / 25,000
Hourly Direct Labor Cost rate = $100 per hour
<u>Computation of Indirect cost</u>
Office Rent $320,000
Support staff salaries $1,260,000
Utilities <u>$420,000</u>
Total Indirect Costs <u>$2,000,000</u>
Predetermined indirect cost allocation rate = = Total Estimated indirect cost / Total estimated direct labor cost = 2,000,000 / 2,500,000 = 80% of Direct Cost
2. Direct Labor $25,000 (250 * 100)
Indirect Cost <u>$20,000</u> (25,000 * 80%)
Total Predicted cost <u>$45,000</u>
3. Predicted cost $45,000
Desired Profit <u>$22,500</u> (50% of $45,000)
Required Service revenue <u>$67,500</u>
