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The following information relates to a management consultancy organisation:
Salary cost per hour for senior consultants 40
Salary cost per hour for junior consultants 25
Overhead absorption rate per hour applied to all hours 20
The organisation adds 40% margin on sales price to arrive at the final fee to be charged to a client. Assignment number 620 took 54 hours of a senior consultant’s time and 110 hours of junior consultant’s time.
What is the final fee charged for assignment 620?
(a) $6,874
(b) $10,696
(c) $11,466
(d) $ 13,650
My answer is option c but correct option is dSalary costs = 54 @ $40 + 110 @ $25 = 4,910.
Overheads = 164 @ $20 = 3,280.
Total costs = 8,190.
Costs + Profit = Selling price
60 40 100(as with your previous question, GP% is applied to selling price)
So, selling price = 8,190/0.6 = 13,650
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