# Newbery and Newstead is a public accounting firm specialising in auditing local medium-sized businesses. Fees charged for

## Question:

Newbery and Newstead is a public accounting firm specialising in auditing local medium-sized businesses. Fees charged for each audit are determined on the basis of identifiable hours worked on an audit by each one of the accountants in the firm, an allocation of general overheads via a predetermined rate per chargeable hour, plus a mark-up of 40% on the cost of chargeable hours for the accountants working on the audit. The hourly charge rate for one of its accountants, Michael, set for the year ending 30 June 2019, is \$120. The following budgeted information was used at the beginning of the year to determine the overhead application rate per chargeable hour to be assigned to all audit jobs during the year ending 30 June 2019.

Total budgeted chargeable hours of all accountants in the firm were 21 600 hours. Estimated overheads were as follows.

Required

(a) Calculate the application rate for the firm’s overheads. (Ignore GST.)

(b) If Michael was the only accountant to work on the annual audit of APT Ltd, and he recorded 90 hours on this audit, determine the total costs (labour and overheads) to be charged to this client.

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