Southern, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expects to incur $525,000 of indirect costs this year, and she expects her firm to work 3,500 direct labor hours. Southerns systems consultants provide direct labor at a rate of $340 per hour. Clients are billed at 160% of direct labor cost. Last month, Southerns consultants spent 190 hours on Halbert’s engagement.
1. Compute Southern’s predetermined overhead allocation rate per direct labor hour.
2. Compute the total cost assigned to the Halbert engagement.
3. Compute the operating income from the Halbert engagement.