Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of the firm wide overhead costs to the labor cost of the consultants on the engagement. The overhead costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Mackenzie Consulting’s overhead costs are $5 million per year, and total consultant labor cost is estimated at $2.5 million per year. Required (a) What is Mackenzie Consulting’s cost driver rate? (b) If the consultant labor cost on an engagement is $25,000, what cost will Mackenzie Consulting compute as the total cost of the consulting engagement?
Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of the firm wide overhead costs to the labor cost of the consultants on the engagement. The overhead costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Mackenzie Consulting’s overhead costs are $5 million per year, and total consultant labor cost is estimated at $2.5 million per year. Required (a) What is Mackenzie Consulting’s cost driver rate? (b) If the consultant labor cost on an engagement is $25,000, what cost will Mackenzie Consulting compute as the total cost of the consulting engagement?
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter11: Linear Optimization Models
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Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of the firm wide overhead costs to the labor cost of the consultants on the engagement. The overhead costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Mackenzie Consulting’s overhead costs are $5 million per year, and total consultant labor cost is estimated at $2.5 million per year.
Required
(a) What is Mackenzie Consulting’s cost driver rate?
(b) If the consultant labor cost on an engagement is $25,000, what cost will Mackenzie Consulting compute as the total cost of the consulting engagement?
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