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A total of 6 workers are paid $23 per hour with an overhead ratio of 1.5 and a personal time allowance percentage is being used in this project which is 12%. What is the total direct labor cost for a job that takes 13 days to complete using 9.0 billable hours per day for a work day?

Answer :

Final answer:

The total direct labor cost for the project, after considering the overhead ratio of 1.5 and a personal time allowance of 12%, is $11,324.32.

Explanation:

First, calculate the total billable hours by multiplying the number of days (13) by the number of billable hours per day (9.0), which totals 117 billable hours. Then, multiply the number of workers (6) by the total billable hours to find the total hours worked which is 702 hours. The overhead ratio is the proportion of indirect costs to the direct costs. Here, with an overhead ratio of 1.5, multiply the total overhead cost by 1.5 to find the total direct labor cost before considering the personal time allowance, which is $10,111 (6 workers * $23 per hour * 117 hours * 1.5). The personal time allowance is a percentage (12%) that represents downtime, so the final direct labor cost should be increased by this percentage. Thus, the final direct labor cost is $11,324.32 ($10,111 * 1.12).

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