Reference no: EM132876169

Question - Cost Systems - To attract local individuals to serve as laborers, Marbles Inc. guarantees its employees a minimum number of hours of work via short-term contracts.

Marbles guarantees one its employees, Ryan, 200 hours of work (i.e., Ryan's capacity based on the 5-week contract that he has signed).

The cost to Marbles of Ryan's contract is $10,000.

Ryan's total availability is 200 hours.

Based on the current outlook, Marbles Inc. likely will only use Ryan for 150 hours.

Additional note: While Marbles appreciates Ryan's human-like qualities, they could also adopt the perspective that he is like a new machine that is not being used to its full capacity. Just saying.

Required -

Based on the provided information, the company has two options of how to allocate Ryan's per-hour labor cost to the different jobs on which Ryan works.

What is the cost per hour allocation rate that Marbles would use for one of these options?

What is the cost per hour allocation rate that Marbles would use for the other option?

Briefly describe reasoning for why Marbles would use each option.