A. In a normal costing system, the budgeted indirect cost allocation rate is calculated by dividing the total indirect costs by the budgeted amount of the allocation base to be used in producing the product. As given in this question, that is 250,000 direct labor hours. The indirect costs are $5,000,000 for labor-related costs and $7,000,000 for non-labor-related costs, for total indirect costs of $12,000,000. Dividing $12,000,000 by 250,000 direct labor hours results in an indirect application rate of $48 per direct labor hour.

Note that in a normal costing system, costs are applied to production on the basis of the actual usage of the allocation base multiplied by the application rate. This is different from standard costing, where costs are applied to production on the basis of the allowed usage of the allocation base for the actual output multiplied by the application rate.

B. This answer results from either dividing direct costs by direct labor hours or by dividing total indirect costs by total direct and indirect labor hours. The question is asking for an allocation of indirect costs. The number of indirect hours are irrelevant here, as indirect costs are allocated based on an activity base that is directly related to production, such as direct labor hours. In a normal costing system, the activity base used is the actual amount of the allocation base that was used in producing the product.

C. This is the indirect non-labor related costs divided by the direct labor hours. This is partially correct, as the direct labor hours are the activity base to use for allocation of indirect costs in a normal costing system. However, all of the indirect costs, labor and non-labor, need to be included in the calculation.

D. This is the indirect labor costs divided by the direct labor hours. This is partially correct, as the direct labor hours are the activity base to use for allocation of indirect costs in a normal costing system. However, all of the indirect costs, labor and non-labor, need to be included in the calculation.