Refer to Exercise E19-24. The president of Western suspects that her allocation of indirect costs could be giving misleading results, so she decides to develop an ABC system. She identifies three activities: documentation preparation, information technology support, and training. She figures that documentation costs are driven by the number of pages, information technology support costs are driven by the number of software applications used, and training costs are driven by the number of direct labor hours worked. Estimates of the costs and quantities of the allocation bases follow: 

Compute the predetermined overhead allocation rate for each activity. Round to the nearest dollar.

Data from Exercises E19-24

Western, 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 $640,000 of indirect costs this year, and she expects her firm to work 4,000 direct labor hours. Western’s systems consultants provide direct labor at a rate of $280 per hour. Clients are billed at 160% of direct labor cost. Last month, Western’s consultants spent 170 hours on Halbert’s engagement.

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Activity Documentation preparation Information technology support Training Total indirect costs Estimated Cost Allocation Base $ 65,850 Pages 150,150 Applications used 424,000 Direct labor hours $ 640,000 Estimated Quantity of Allocation Base 1,317 pages 715 applications 4,000 hours