Question

A professional audit firm charged juniors at $50 per hour, seniors at $200 per hour and the overhead rate for both was 100 per cent on direct labour. The firm added 5 per cent on total cost to arrive at a fee to be charged. If a job took 10 junior hours and 2 senior hours, what was the fee charged? Select one: a. $900 b. $945 c. $1470 d. $1890

Answer 1

Direct labor rate for Junior = $50 per hour

Direct labor rate for Senior = $200 per hour

Overhead rate = 100% of direct labor cost

Mark up = 5% on total cost

Junior hours used on the Job = 10

Senior hours used on the Job = 2

	Junior Hour	Senior Hour	Total
Direct labor hours (i)	10	2
Direct labor rate (ii)	$50	$200
Direct labor cost (iii = i x ii)	$500	$400
Overhead applied (iv)	$500	$400
Total cost (iii + iv)	$1,000	$800	$1,800

Total cost = $1,800

markup = 5% on total cost

= 1,800 x 5%

= $90

Fee charged = Total cost + Markup

= 1,800+90

= $1,890

Correct option is d.

Kindly comment if you need further assistance.

Thanks‼!