Answer:
Given that the hourly wage for full-time employees is $150, whereas for trainees it is $27, clients who utilize a greater proportion of full-time employees compared to trainees will be charged less or under billed for the labor or resources they have used.
Explanation:
The information presented in the question needs to be organized before providing an answer, as described:
Details Budget Actual
Indirect costs $250,000 $400,000
Annual salary for each full-time employee $200,000 $250,000
Annual salary for each trainee $40,000 $45,000
Total work hours 40,000 dlh 50,000 dlh
In a normal costing system, actual costs are factored in.
Thus, labor hours for each group and hourly costs can be computed as shown:
Total labor hours for full-time employees = (20/30) * 50,000 = 33,333 hours
Each full-time employee's annual labor hours = 33,333/20 = 1,667 hours
Hourly rate for full-time employees = $250,000/1,667 = $150 per hour
Total labor hours for trainees = (10/30) * 50,000 = 16,667 hours
Annual labor hours for each trainee = 16,667/10 = 1,667 hours
Hourly rate for trainees = $45,000/1,667 = $27 per hour
Due to the hourly rate discrepancies, clients who make use of a larger number of full-time employees than trainees will be charged less or under billed for the labor or resources utilized.
