Mackenzie Consulting computes the cost of each consultingengagement by adding a

Question

Mackenzie Consulting computes the cost of each consultingengagement by adding a portion of frimwide support costs to thelabor cost of the consultants on the engagement. The supportcosts are assigned to each consulting engagement using a costdriver rate based on consultant labor costs. MackenzieConsulting's support costs are 5 million per year, and totalconsultant labor cost is estimated at 2.5 million per year.

a. What is Mackenzie Consulting's support cost driverrate?

b. If the consultant labor cost on an engagement is 25,000,what cost will Mackenzie Consulting compute as the total cost ofthe consulting engagement?

Explanation / Answer

25,000

50,000

75,000

Consultant labor cost

25,000

Add : Consulting SupportCost      25,000 x 2

50,000

               Total Cost of engagement

75,000

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