Question

Barrett ​Associates, a law​ firm, hires Attorney Sandra Trent at an annual salary of $ 85 comma 000. The law firm expects her to spend 1 comma 700 hours a year performing legal work for clients. Indirect costs are assigned to clients based on attorney billing hours. Firm attorneys are expected to work a total of 12 comma 000 direct labor hours this year. Before the fiscal year​ begins, Barrett estimates that the total indirect costs for the upcoming year will be $ 360 comma 000.
Requirements
1. What would be the hourly (cost) rate to Gallagher Associates of employing Nault?
2. If Nault works on Client 367 for 17 hours, what direct labor cost would be traced to Client 367
3. What is the indirect cost allocation rate?
4. What indirect costs will be allocated to Client 367?
5. What is the total job cost for Client 367?

Answer 1

Answer:1.$50/hr

2. $850

3.$30

4.$510

5.$1360

Explanation:

1. Hourly rate= Total annual salary/Number of hours worked

$85,000/1,700 hours=$50/hour.

2. Direct labour cost for client 367 = Hourly(required 1)× Number of hours billed

$50/hour × 17 hours= $850

3. Indirect cost allocation rate = Total indirect costs/ Total number of billed hours

$360,000/12,000 hours= $30/hour

4. Indirect costs allocated to client= Indirect cost allocation rate × Number of attorney billing hours

$30 (from required 3) × 17 hours = $510.

5. Total job cost = direct costs + indirect costs allocated

850 + 510 = 1360.

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