Lewis and Partners tracks costs for individual tax return clients separately.Direct labour cost drives its service overhead costs.During the month of September,the following data were available for Client #156:
Direct labour$\quad $ $\quad $400 hours at $\$ 15$ per hour
If total overhead costs during the month totalled $10 000 when a total of $30 000 in direct labour costs were incurred,what will be the overhead allocated to Client #156?
A) $1000
B) $3000
C) $750
D) $2000

Question

Quizplus · Accepted Answer

The overhead rate is calculated based on total overhead costs divided by total direct labour costs, which is $10,000 / $30,000 = 0.3333 (or 33.33%). For Client #156, the direct labour cost is 400 hours at $15 per hour, which totals $6,000. The overhead allocated to Client #156 is therefore 33.33% of $6,000, which equals $2,000.

Lewis and Partners Tracks Costs for Individual Tax Return Clients \quad

Lewis and Partners Tracks Costs for Individual Tax Return Clients $\quad$