Question

Sheridan Company provides financial consulting and has collected the following data for the next year’s budgeted activity for a lead consultant.

Consultants’ wages	$80000
Fringe benefits	$32500
Related overhead	$27500
Supply clerk’s wages	$19000
Fringe benefits	$5000
Related overhead	$22000
Profit margin per hour	$20
Profit margin on materials	15%
Total estimated consulting hours	5000
Total estimated material costs	$166000

The labor rate per hour is

$46.50.

$48.00.

$28.00.

$47.50.

Answer 1

Computation Labor rate per Hour
Consultants’ wages	$80,000
Fringe benefits	$32,500
Related overhead	$27,500
Budgted labor cost	$140,000
Total estimated consulting hours	5,000 Hours
Budgeted labor overhead rate (Budgted labor cost / Total estimated consulting hours)	$28 ($140,000 / 5,000 hours)
Labor rate per hour   = Budgeted labor overhead rate + Profit margin per hour                                           =   $28 + $20                                           = $48 per hour
From given options, option (b ) is correct, i.e., $48