PA 4-1 It takes a lawyerIt takes a lawyer 117 minutes to serve one customer. Demand is 3 customers per 10 hour day. The lawyer has a wage rate of $225 per hour from a law firm. What is the cost of direct labor for the lawyer expressed in $ per customer

The cost of direct labor for the lawyer based on demand rate = $750 per customer

Cost of direct labour for the lawyer based on supply rate = $450 per customer

Explanation:

Cost of direct labour is normally calculated from the demand rate.

In a 10 hour work period, the lawyer has 3 customers.

In a 10 hour work period, the lawyer is paid $225 × 10 = $2250

Wage rate per customer = ($2250/3) = $750 per customer

Based on supply rate (Rate at which the lawyer answers the customers)

Lawyer spends 117 minutes per customer. That is, (117/60) = 1.95 hours per customer.

Meaning, in a 10 hour work period, the lawyer has (10/1.95) = 5.13 ≈ 5 customers per 10 hour work day.

Direct labour rate based on the supply rate = $2250/5 = $450 per customer.

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