Calculating Indirect Rates

Cost ElementCostSubtotalRate

Direct Labor Base $15,500,000.00

Overhead Expense $8,000,000.00

Burdened Labor Subtototal $

Other Direct Costs

Subcontracts $3,500,000.00

Materials $3,250,000.00

Travel $35,000.00

Special Tooling $875,000.00

ODC Subtotal $

G&A Cost Base $

G&A Expense $5,500,000.00

Total Costs $

Overhead Rate%

G&A Rate%

Profit $ 10%

Contract Total $

(1) In the blank provided enter the Burdened Labor Subtotal.Be sure to include the commas and decimal values (to two places for example for $50 enter 50.00) as well.You DO NOT need to include the $ sign.The total Burdened Labor Subtotal is $

(2) The total value for the other direct costs in this exercise is (select correct answer)

cannot be determined without knowing the value of the direct costs

$ 4,160,000.00

$ 7,660,000.00

$ 31,160,000.00

(3) Which of the following explains how to obtain the value for total costs?

All costs except overhead and G&A make up the total costs.The total costs for this exercise would be $ 23,160,000.00.

All direct costs, overhead and G&A are added together for a total cost amount of $36,660,000.00

Direct costs, overhead expense and other direct costs are added together for a total of $ 31,160,000.00.

The total cost is the sum of the direct and indirect costs as well as the G&A cost base.The total cost is $62,320,000.00

(4) How would you find the G&A rate for this exercise?

Divide the G&A cost base by the G&A Expense using the following formula Cost Base/Expense Pool

The G&A rate for this exercise is found by dividing the G&A expense pool of $5,5000,000 by the G&A cost base.

When calculating the G&A Rate we would exclude the overhead expenses from the cost base.

The G&A rate is found by dividing the direct costs by the indirect costs.

The G&A rate for this exercise is found by dividing the cost base by the total costs

(5) The overhead rate

includes all costs both direct and indirect in the pool.

The overhead rate is calculated based on the comparison of the G&A expenses of $5,500,000.00 and the overhead expense of $ 8,000,000.00.

In this example the overhead rate is calculated by looking at the relationship of the labor base of $ 15,500,000.00and total costs minus the G&A expense.

The overhead rate is the sum of the indirect costs

In this example the overhead rate is calculated by looking at the relationship of the labor base of $ 15,500,000.00and overhead expenses of $8,000,000.

(6) Profit in this example is

10% of the direct costs

10% of the costs minus the G&A expense of $ 5,550,000.00

10% of the total costs

only applied to the direct labor cost plus the other direct costs.

(7) The contract total in this example

will include all direct costs and indirect costs plus profit

will be over $50,000,000.00

will not include G&A expenses

will not include profit

(8) In looking at this worksheet how many indirect cost pools are indicated?

none - in this example all the costs are charged as direct

three- overhead, G&A and other direct costs

one - overhead

two -overhead and G&A

(9) In considering the pricing which of the following is true?

If there were 100 employees and all made the same salary, each would be making $235,000. in salary

Customers have specific requirements for the company to travel to meet the contract requirements

This is probably not a manufacturing company since they have subcontracts

The materials are being provided to the subcontractor

(10) One of the following statements is false.Select the false statement.

The G&A rate is lower than the overhead rate.

Most of the contract cost is related to the direct labor and ovehead

This company is very efficient as they have a low G&A rate

The profit and cost of subcontracts are within $200,000 of each other