Bar None Legal Services, Inc. is a consulting firm that offers optimal legal solutions. It allocates indirect costs using a single predetermined overhead allocation rate with direct labor hours as the allocation base. The estimated indirect costs for this year amount to $170,000. The company is expected to work 17,000 direct labor hours during the year. The direct labor rate is $200 per hour Clients are billed at 130% of direct labor cost. Last month, Bar None's consultants spent 180 hours on Henderson, Inc. Calculate the total costs assigned and allocated to Henderson.

A. $37,800
B. $189,000
C. $9000
D. $36,000

$37800 ( A )

Explanation:

The Total cost assigned to Henderson is the summation of the total direct cost and the total indirect cost incurred by Henderson

Estimated indirect costs  amount = $170000

Direct labor hours = 17000

Indirect cost per hour = = = $10

For Henderson

total hours spent on Henderson = 180

cost of direct labor per hour = $200

Total direct cost = 180 * 200 = $36000

Total indirect cost = indirect cost per hour * total hours spent on Henderson

                              = $10 * 180 = $1800

therefore the total costs allocated to Henderson = $36000 + $1800 = $37800

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