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4 December, 12:24

Bass Accounting Services expects its accountants to work a total of 26 comma 000 direct labor hours per year. The company's estimated total indirect costs are $ 390 comma 000. The company uses direct labor hours as the allocation base for indirect costs. What is the indirect cost allocation rate? A. $ 18.00 per hour B. $ 30.00 per hour C. $ 15.00 per hour D. $ 150.00 per hour

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Answers (2)
  1. 4 December, 12:26
    0
    C) $ 15.00 per hour

    Explanation:

    total labor hours 26,000 per year

    total indirect costs $390,000

    if the company allocates indirect costs according to labor hours employed, the cost allocation rate should be:

    $390,000 / 26,000 = $15 per direct labor hour

    This means that for every labor hour employed, $15 will be allocated as indirect costs, e. g. a client requires 50 labor hours per year and $750 ( = 50 x $15) in indirect costs.
  2. 4 December, 12:52
    0
    The correct answer is option (c) $15 per hour

    Explanation:

    Solution

    Recall that:

    Expected wok for accountants = 26,000

    The company estimated total indirect costs - 390,000

    The next step is to find the allocation base cost for indirect cost.

    Now,

    The indirect labor cost is calculated as follows:

    indirect cost allocation rate:

    = Total indirect costs/Labor hours

    = $390,000/26,000

    = $15 per hours
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