Mackenzie Consulting computes the cost of each consulting engagement by adding a portion of firmwide overhead costs to the labor cost of the consultants on the engagement. The overhead costs are assigned to each consulting engagement using a cost driver rate based on consultant labor costs. Mackenzie Consulting’s overhead costs are $5 million per year, and total consultant labor cost is estimated at $2.5 million per year.

Required

(a) What is Mackenzie Consulting’s cost driver rate?

(b) If the consultant labor cost on an engagement is $25,000, what cost will Mackenzie Consulting compute as the total cost of the consulting engagement?