Washington Co. employs ten full-time professionals. The budgeted compensation per employee is $60,000. The maximum billable hours for each client are 400. Clients always receive their full amount of time. All professional labor costs are included in a single direct-cost category and are traced to jobs on a per-hour basis. Any other costs are included in a single indirect-cost pool, allocated according to professional labor-hours. Budgeted indirect costs for the year are $200,000 and the firm had 25 clients.
a. What is the direct-labor-cost rate per hour?
b. What is the indirect-cost rate per hour?
c. What is the total cost incurred to the employer per hour?
d. How will the total cost be affected if the firm loses out on 4 clients?