Bar None Legal Services, Inc. is a consulting firm that offers optimal legal solutions. It allocates indirect costs using a single predetermined overhead allocation rate with direct labor hours as the allocation base. The estimated indirect costs for this year amount to $170,000. The company is expected to work 17,000 direct labor hours during the year. The direct labor rate is $200 per hour Clients are billed at 130% of direct labor cost. Last month, Bar None's consultants spent 180 hours on Henderson, Inc. Calculate the total costs assigned and allocated to Henderson.

A. $37,800
B. $189,000
C. $9000
D. $36,000

Overhead application rate is the rate at which manufacturing overheads are applied to a product / project / department. It is calculated by dividing the Budgeted overhead by the budgeted level of activity on which the overhead is applied.

Overhead application rate = Budgeted overhead / Budgeted activity

Overhead application rate = Budgeted overhead / Budgeted machine hours

Overhead application rate = $170,000 / 17,000 labor hours

Overhead application rate = $10 per labor hour

Assigned Overhead = Overhead application rate x Number of machine hours consumed = $10 x 180 = $1800

Direct labor cost = $200 x 180 = $36,000

Total Cost assigned to Henderson = $36,000 + $1,800 = $37,800

batolisis batolisis · Answer 2 · 2020-03-17T15:17:00+01:00

Answer:

$37800 ( A )

Explanation:

The Total cost assigned to Henderson is the summation of the total direct cost and the total indirect cost incurred by Henderson

Estimated indirect costs amount = $170000

Direct labor hours = 17000

Indirect cost per hour = [tex]\frac{indirect cost}{direct labor hours}[/tex] =[tex]\frac{170000}{17000}[/tex] = $10

For Henderson

total hours spent on Henderson = 180

cost of direct labor per hour = $200

Total direct cost = 180 * 200 = $36000

Total indirect cost = indirect cost per hour * total hours spent on Henderson

= $10 * 180 = $1800

therefore the total costs allocated to Henderson = $36000 + $1800 = $37800