Question

Johnson applies all indirect operating costs as a percentage of the consultants labor cost. During the most recent year, the firm estimated that it would pay $675,000 to its consultants and incur indirect operating cost of $1,417,500. During the year, Johnson provided 104 hours of consulting services to Jack for which johnson pay an average of $16 per hour. What is the total cost of providing services to jack?\

$2,456

$5,097

$4,857

$5,158

Answer 1

Based on the information available in the question, we can answer as follows:-

Step 1:- Calculate the indirect operating cost for every $1 paid to the consultant.

Indirect operating cost per $ paid to consultant = $1,417,500/$675,000 = $2.1 per dollar of labour cost

Step 2:- Calculate the cost of providing services to Jack

=104 hours * $16 per hour = $1,664

Indirect cost = $3,494 ($1,664 * $2.1)

Total cost = $5,158 ($3,494 + $1,664)

Based on the above calculation, the correct answer is Option D - $5,158.

Option A, Option B and Option C are incorrect per the above calculations and considerations.

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