Rubio,Inc ,A Law Consulting Firm,has Been Using a Single Predetermined

question 82

Multiple Choice

Rubio,Inc. ,a law consulting firm,has been using a single predetermined overhead allocation rate with direct labor hours as the allocation base to allocate overhead costs.The direct labor rate is $300 per hour.Clients are billed at 160% of direct labor cost.Chandler Massey,the president of Rubio,decided to develop an ABC system to more accurately allocate the indirect costs.He identified two activities related to the total indirect costs-travel and information technology (IT) support.The other relevant details are given below: $\begin{array}{|l|l|r|r|}\hline\text { Activity } & \text { Allocation base } & \text { Estimated costs } & \begin{array}{c}\text { Estimated quantity } \\\text { of allocation base }\end{array} \\\hline \text { Travel } & \text { Miles driven } & \$ 85,000 & 1,500 \text { miles } \\\hline \text { IT Support } & \text { Direct labor hour's } & \underline{59,000} & 1,250 \text { DLH } \\\hline \text { Total } & & \$ 144,000 & \\\hline\end{array}$ The predetermined overhead allocation rate for travel will be ________.(Round your answer to the nearest cent. )

• A)$47.20 per mile
• B)$56.67 per mile
• C)$68.00 per mile
• D)$96.00 per mile

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Definitions:

Economic Rent

Extra earnings above the minimum amount necessary for a resource to remain in its current use, often arising from scarcity or market control.

Natural Resources

Materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain.

Market Prices

The current price at which a good or service can be bought or sold in an open market, determined by supply and demand dynamics.

Economic Profits

The surplus remaining after total costs are deducted from total revenues, accounting for both explicit and implicit costs.