Sargent Corporation applies overhead cost to jobs on the basis of 80% of direct labor cost. If Job 210 shows $10,000 of manufacturing overhead cost applied, how much was the direct labor cost on the job?
A) $12,500
B) $11,000
C) $8,000
D) $10,000

Question

Quizplus · Accepted Answer

The direct labor cost is calculated by dividing the manufacturing overhead cost by the overhead rate. Given that the overhead rate is 80% (or 0.8) of direct labor cost, and the manufacturing overhead cost applied is $10,000, the direct labor cost is $10,000 / 0.8 = $12,500.

Sargent Corporation Applies Overhead Cost to Jobs on the Basis