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?

Question

Business

Dangelo Barajas

13 December, 13:31

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?

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Alisa Estrada · Answer 1

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

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