A local accounting firm employs 26 full-time professionals. The budgeted annual

Question

A local accounting firm employs 26 full-time professionals. The budgeted annual compensation per employee is $48,500. The average chargeable time is 400 hours per client annually. All professional labor costs are included in a single direct cost category and are allocated to jobs on a per hour basis. Other costs are included in a single indirect cost pool, allocated according to professional labor hours. Budgeted indirect costs for the year are $786,000 and the firm expects to have 65 clients during the coming year.

What is the budgeted direct labor cost rate per hour? Round the final answer to the nearest cent.

a. $30.23 per hour

b. $4.66 per hour

c. $121.25 per hour

d. $48.50 per hour

Explanation / Answer

d.$48.50.

total direct labour cost = compensation per employee * number of professionals

=>$48,500 * 26

=>$1,261,000.

tota direct labour hours = average chargeable time per client * number of clients during the year

=>400 * 65 =>26,000 hours.

budgeted direct labour cost per hour =total direct labour cost / total client hours.

=> $1,261,000 / 26,000 hours =>$48.50 per hour

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