Galbraith Company applies overhead cost to jobs on the basis of 70% of direct Labour cost. If Job 201 shows £28,000 of manufacturing overhead applied, the direct Labour cost on the job was
A)£40,000.
B)£19,600.
C)£28,000.
D)£36,400.

Question

Quizplus · Accepted Answer

The direct labor cost is calculated by dividing the manufacturing overhead applied by the overhead rate. Given that the overhead rate is 70% of direct labor cost, and the manufacturing overhead applied is £28,000, the direct labor cost is £28,000 / 0.70 = £40,000.

Galbraith Company Applies Overhead Cost to Jobs on the Basis