Practice Quiz

Surveying FS

Category - Law & Business

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A year-end audit conducted for an engineering firm provided the following information. What is the firm’s calculated overhead rate?

Item Cost ($)
Direct Labor 6,234,668
Allowable fringe benefits 3,233,889
Allowable general overhead 8,444,444
Facility cost of capital (FCCM) 190,000


  1. 112%
  2. 156%
  3. 187%
  4. None of the above.
Explanation
Answer: C - The firm’s calculated overhead rate is 187%.

Solution

Use the overhead rate formula.
Overhead rate = (fringe benefit + general overhead)/ direct labor

Overhead rate = ($3,233,889 + $8,444,444)/ $6,234,668

= 1.873 (187%)

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