Austin Accounting Services estimates for next year revenues of $2,000,000, direct labor of $400,000, and overhead of $700,000.Under traditional costing, overhead is applied to audit jobs using the rate of

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The overhead rate under traditional costing is calculated as overhead divided by direct labor, which is $700,000 / $400,000 = 1.75 or 175% of direct labor.

Austin Accounting Services Estimates for Next Year Revenues of $2,000,000