Question: An engineering rm has historically allocated its overhead costs based on billable hours. The rm's direct labor cost averages $35 per employee hour, and it normally bills these hours to clients at $75 per hour. The rm is considering a change to an allocation vehicle of direct cost. This month's overhead consists of $25,000 for the managing partner and sta , $8000 for training and other personnel costs, $32,000 in proposal preparation costs, $12,000 in subcontract administration, and $6000 for other administrative expenses.
(a) What is the total cost for each project under each allocation method? Use the rm's cost of $35 per employee hour and subcontract cost plus the allocated overhead to answer this.
(b)With the information given in this problem, devise and applay a new system that represents a simplified version of activity based costing.