Allocating indirect costs and computing income, service company Western, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Westerns systems consultants provide direct labor at a rate of $280 per hour. Clients are billed at 160% of direct labor cost. Last month, Westerns consultants spent 170 hours on Halbert’s engagement. Requirements Compute Western’s predetermined overhead allocation rate per direct labor hour. Compute the total cost assigned to the Halbert engagement. Compute the operating income from the Halbert engagement.
Allocating indirect costs and computing income, service company Western, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Westerns systems consultants provide direct labor at a rate of $280 per hour. Clients are billed at 160% of direct labor cost. Last month, Westerns consultants spent 170 hours on Halbert’s engagement. Requirements Compute Western’s predetermined overhead allocation rate per direct labor hour. Compute the total cost assigned to the Halbert engagement. Compute the operating income from the Halbert engagement.
Chapter3: Cost-volume-profit Analysis
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Allocating indirect costs and computing income, service company
Western, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Westerns systems consultants provide direct labor at a rate of $280 per hour. Clients are billed at 160% of direct labor cost. Last month, Westerns consultants spent 170 hours on Halbert’s engagement.
Requirements
- Compute Western’s predetermined
overhead allocation rate per direct labor hour. - Compute the total cost assigned to the Halbert engagement.
- Compute the operating income from the Halbert engagement.
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