Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessi

Question

Roiann and Dennett Law Office employs 12 full-time attorneys and 10 paraprofessionals. Direct and indirect costs are applied on a professional labor-hour basis that includes both attorney and paraprofessional hours. Following is information for 2014: Indirect costs Annual salary of each attorney Annual salary of each paraprofessional Total professional labor-hours Budget $270,000 $100,000 Actual $300,000 $110,000 $ 30,000 $ 29,000 50,000 dlh 60,000 dlh 3) What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per professional labor-hour? A) $27.00; $4.1 7 B) $29.80; $5.40 C) $32.40; $5.00 D) $27.00; $5.00

Explanation / Answer

Solution: Answer is D). $27.00; $5.00 Working Notes: Actual direct-cost rate = [(Annual salary of each attorney x no. of full time attorney) + (Annual salary of each paraprofessional x no. of paraprofessionals)]/Actual professional labor-hours Actual direct-cost rate = (($110,000 x 12) + ($30,000 x 10))/60,000 =($1,320,000 + $300,000)/60,000 =$1,620,000/60,000 =$27.00 Actual indirect-cost rate = Actual Indirect costs / Actual professional labor-hours =$300,000/60,000 =$5 Please feel free to ask if anything about above solution in comment section of the question.

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