Halo, 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 $120,000. The company is expected to work 6,000 direct labor hours during the year. The direct labor rate is $200 per hour. Clients are billed at 120% of direct labor cost. Last month, Halo's consultants spent 180 hours on Bloomington, Inc Calculate the total costs assigned to Bloomington.
A) $39,600
B) $36,000
C) $144,000
D) $3,600
Answer is A
Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base = $120,000 / 6,000 direct labor hours = $20.00 per DL hour
Direct labor (180 hours x $200 ) $36,000
Indirect costs (180 hours x $20.00 ) 3,600
Total costs $39,600
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