A local engineering firm is bidding on a design project for a new client.  The total budgeted direct-labor costs for the firm are $400,000.  The total budgeted indirect costs are $600,000.  It is estimated that there are 8,000 billable hours in total. Required: What is the budgeted direct-labor cost rate? What is the budgeted indirect-cost rate assuming direct-labor cost is the allocation base? What should be the engineering firm bid on the project if the direct labor hours are estimated at 300 hours?

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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.