Enlighten Services, Inc., a management consulting firm, has been using a single

Question

Enlighten Services, Inc., a management consulting firm, has been using a single predetermined overhead allocation rate with direct labor hours as the allocation base to allocate overhead costs. The direct labor rate is $50 per hour. Miriam Levy, the president of Enlighten, decided to develop an ABC system to accurately allocate the indirect costs. She identified two activities related to the total indirect costs travel and information technology (IT) support. The other relevant details are given below: Estimated Estimated quantity Activity Travel IT Support Total Allocation base Miles driven Direct labor hours costs $92,000 59,000 $151,000 of allocation base 1,500 miles 1,050 DLHr During the current month, Enlighten's consultants spent 125 labor hours for Malka, Inc. The job required the professionals to travel 300 miles in total. Determine the total cost of the consulting job using the ABC system. (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.) O A. $7,024 O B. $2,810 O C. $31,673 O D. $6,250

Explanation / Answer

Activity Allocation Base Estimated Cost Estimated Quatity of allocation base Cost per qty of allocation base Travel Miles Driven 92000 1500 miles $                           61.33 IT Support Direct Labour Hrs 59000 1050 DLH $                           56.19 151000 Current Month Data Activity Qty Incurred Cost per allocation Base Total Cost Travel 300 miles $              61.33 $              18,400.00 IT Support 125 DLH $              56.19 $                7,023.81 $              25,423.81 Total Cost Direct Labour (125 DLH*$50 per hr) $                6,250.00 Oherhead applied $              25,423.81 TOTAL COST $              31,673.81 Answer is C

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.