Question

Bass Accounting Services expects its accountants to work a total of 23 comma 000 direct labor hours per year. The​ company's estimated total indirect costs are $ 322 comma 000. The company uses direct labor hours as the allocation base for indirect costs. What is the indirect cost allocation​ rate?

Answer 1

Estimated indirect costs allocation rate= $14 per direct labor hour

Step-by-step explanation:

Giving the following information:

Estimated direct labor hours= 23,000

Estimated indirect costs= $322,000.

To calculate the allocation rate, we need to use the following formula:

Estimated indirect costs allocation rate= total estimated indirect costs for the period/ total amount of allocation base

Estimated indirect costs allocation rate= 322,000/23,000

Estimated indirect costs allocation rate= $14 per direct labor hour