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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 approximate facility capital cost of money (FCCM) on a direct labor basis?

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. 32.81%
  2. 16.2%
  3. 3.0%
  4. None of the above
Explanation
Answer: C - The firm’s approximate facility capital cost of money (FCCM) on a direct labor basis is 3.0%.

Solution

Determine the ratio of the facilities capital cost to the cost of direct labor.

FCCM rate = FCCM/direct labor cost

= ($190,000)/($6,234,668)

= 0.03 (3.0%)
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