Telecom Systems (TS) offers telecommunications design and consulting services to organizations. The firm offers two types of contracts to its clients: a cost plus 25% contract and a fixed fee contract where TS offers a fixed price for the job. For cost-plus contracts, total cost includes both direct costs and indirect overheads. TS completes 10 costs plus contracts at a total direct cost of $450,000. TS also completes 15 fixed fee contracts and revenues collected from the fixed-fee contracts total $2,400,000. The total direct cost of the fixed fee contracts amounts to 75% of the collected revenues. TS has indirect overheads of $400,000.

Allocate the indirect overhead of $400,000 to the fixed fee and cost-plus 25% contracts using direct cost as overhead allocation base.

Select one:

a.

Fixed Fee contract gets $320,000 and

Cost-Plus 25% contract gets $80,000 from indirect overhead $400,000.

b.

Fixed Fee contract gets $350,000 and

Cost-Plus 25% contract gets $50,000 from indirect overhead $400,000.

c.

Fixed Fee contract gets $340,000 and

Cost-Plus 25% contract gets $60,000 from indirect overhead $400,000.

d.

Fixed Fee contract gets $300,000 and

Cost-Plus 25% contract gets $100,000 from indirect overhead $400,000.