ACCA Applied Knowledge · Management Accounting · Cost accounting methods
A firm of accountants charges clients on the basis of chargeable hours. Staff cost $90,000 for 2,000 available hours, of which 75% are chargeable. Other overheads are $30,000. What cost per chargeable hour should be used to recover all costs?
The cost per chargeable hour is $80. Total costs of $120,000 are divided by 1,500 chargeable hours, being 75% of 2,000 available hours, so non-chargeable time is recovered through the chargeable hours.
- A$80Correct
- B$60
- C$45
- D$120
Explanation
Total cost = 90,000 + 30,000 = $120,000. Chargeable hours = 2,000 x 75% = 1,500. Cost per chargeable hour = 120,000 / 1,500 = $80. $60 uses all 2,000 hours, which wrongly ignores non-chargeable time; $45 excludes overheads and uses available hours incorrectly.
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