Venus Corp Employs Ten Full-Time Professionals

question 65

Essay

Venus Corp employs ten full-time professionals.The budgeted compensation per employee is $50,000.The maximum billable hours for each client are 500.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 $250,000 and the firm had 30 clients.
Required:
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 5 clients?

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Definitions:

Put Option

A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Exercise Price

The set price at which an option's holder has the right to purchase or sell the asset in question.

Intrinsic Value

The true or inherent value of a financial asset, based not on market price but on an underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors.

Pure Discount Bond

A type of bond that is issued at a discount to its face value, pays no interest, and is redeemed at its face value at maturity.