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The budgeted overhead cost for the year is $1,260,000. the company has estimated that one-third of the budgeted overhead cost is incurred to support the firm's two partners, and two-thirds goes to support the staff accountants. the current audit bid for monoco industries requires $18,000 in direct partner professional labor, $30,000 in direct staff accountant professional labor, $5,000 in direct material. what is the overhead rate based on a single cost driver (rounded to the nearest percentage)?

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Answer:

90%

Explanation:

The computation of the overhead rate based on a single cost driver is shown below:

= Total Overheads ÷ Total Compensation

where,

Total overhead = $1,260,000

Total compensation = Compensation to partners + Compensation to staff accountants

= $560,000 + $840,000

= $1,400,000

So, the overhead rate equal to

= $1,260,000 ÷ $1,400,000

= 90%

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