Lubbok Engineering Consultants is a firm of professional civil engineers. The firm obtains its jobs by giving fixed-price quotations, so the profitability depends on the ability predict the time needed to complete all the subtasks necessary for the successful completion of the jobs. Several types of personnel (secretaries, assistants, engineers, senior engineers, managers and partners) work on these jobs for varying amounts of time.
Lubbock engineering has the following budget for 2011:
- Compensation for professional staff: $3,600,000
- Other Costs: $1,449,000
Each professional member must submit a weekly billable time report which is used for charging hours to a client job-order record. In addition, the same time record is used to charge overhead costs for the client job-order record. The firm estimates that 15% of the professional employees time is not billable because they may be involved in continuing education activities, unassigned time, etc. This nonchargeable time is treated as overhead cost.
(a) Calculate overall overhead cost rate for the firm as a percentage of the direct professional labor cost
(b) a senior engineer works 48 weeks/year, 40 hours/week. His compensation is $60,000/year. He has worked on two jobs during the last week devoting 10 hours to Job A and 30 hours to Job B. How much cost should be charged to Job A because of his work on that job?