Sweet Company applies overhead to jobs on the basis of 125% of direct labour cost. If Job 107 shows $10,000 of manufacturing overhead applied, how much was the direct labour cost on the job:

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 125% (or 1.25) of the direct labor cost, and the manufacturing overhead applied is $10,000, the direct labor cost is $10,000 / 1.25 = $8,000.

Sweet Company Applies Overhead to Jobs on the Basis of 125