Reference no: EM131792078
A dental office is in the process of changing their costing system. Their system currently uses a single direct cost pool(professional labour) and a single indirect cost pool(staff support). The direct categories in thenew, refined costing systeminclude:
1. Professional partner labour. Average total annual compensation of the two partners is$100,000 each, and each partner has2,000 hours of budgeted billable time.
2. Dental assistant labour. Average total annual compensation of the four assistants is$22,500 each, and each assistant has2,000 hours of budgeted billable time.
3. Office staff. Average total annual compensation of the two staff members is$15,000 each, and each has2,000 hours of budgeted billable time.
The indirect category in the new refined costing system includes professional liability insurance. The budgeted indirect amount is$200,000, and the allocation base is budgeted professional labour hours. The dentist and dental assistants are considered professional labour hours.
What is the budgeted indirect cost allocation rate per unit of the allocation base for the professional liabilityinsurance?
A.$26.67 B.$16.67 C.$1.67 D.$12.50 E.$25.00
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