Question

As of December 2017, Pettigrew Law employed ten full-time professionals. The budgeted compensation per employee is $80,000. The maximum billable hours for each client are 400. Clients always receive their full amount of time. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $400,000 and the firm had 20 clients.                                                                                                                           

Required:

a.      What is the direct-labor-cost rate per hour?

b.      What is the indirect-cost rate per hour?

c.      AX-Industries manufactures 3-D printers. For each unit, $3,400 of direct material is used and there is $2,600 of direct manufacturing labor at $16 per hour. Manufacturing overhead is applied at $20 per direct manufacturing labor hour. Calculate the profit earned on 46 units if each unit sells for $9,500.

Answer 1

Direct Labour Hours (20clients * 400 Hrs)	8,000.00
Cost Per employee	$    80,000.00
No of Employees	10.00
Total Direct Labour Cost	$ 800,000.00
Direct Labour cost per hour	$          100.00
Direct Labour Hours (20clients * 400 Hrs)	8,000.00
Budgeted Indirect Cost	$ 400,000.00
Indirect Labour Cost per Hour	$            50.00
SP	$      9,500.00
Diect materail	$      3,400.00
Direct Labour	$      2,600.00
Factory Overheads ($2600/$16*$20)	$      3,250.00
Profit eanred per product (9500-3400-2600-3250)	$          250.00
No of Products	46.00
Profit eanred on 46 products ($250*46 units)	$    11,500.00