Question

McBride and Associates employs two professional appraisers, each having a different specialty. Debbie specializes in commercial appraisals and Tara specializes in residential appraisals. The company expects to incur total overhead costs of $378,210 during the year and applies overhead based on annual salary costs. The salaries and billable hours of the two appraisers are estimated to be as follows:Debbie Tara Annual Salary $ 150,000 $ 81,000 Billable Hours 2,000 1,800 The accountant for McBride and Associates is computing the hourly rate that should be used to charge clients for Debbie and Tara’s services. The hourly billing rate should be set to cover the total cost of services (salary plus overhead) plus a 20 percent markup.Required:(1) Compute the predetermined overhead rate.(2) Compute the hourly billing rate for Debbie and Tara. (Do not round your intermediate calculations.)

Answer 1

Answer:

Instructions are listed below

Explanation:

Giving the following information:

The company expects to incur total overhead costs of $378,210.

Applies overhead based on annual salary costs.

Debbie:

Annual Salary= 150,000

Billable hours= 2000

Cost per hur= 150000/2000= $75

Tara:

Annual Salary: 81000

Billable hours= 1800

Cost per hour= $45

1) Predetermine overhead rate= Estimated total manufacturing  overhead cost/ estimated total amount of the allocation base

Predetermine overhead rate= 378210/ (150000+81000)= 1.637

2) Hourly billing rate= (cost per hour + overhead rate) + 20% mark up

Hourly billing rate Debbie= (75 + 1.637)*1.2= $91.96

Hourly billing rate Tara= (45 + 1.637)*1.2= $55.96