Lewis and Partners is a legal firm that measures and tracks costs for individual clients separately.While most client work requires some automation time,management has determined that direct labour cost drives its service overhead costs.During the month of September,the following data were available for Client #234:
Direct labour $\quad $ $\quad $ $\quad $200 hours at $ \$ 15 $ per hour
If total overhead costs during the month totalled $5000 when a total of $20 000 in direct labour costs were incurred,what will be the overhead allocated to Client #234?

Question

Quizplus · Accepted Answer

The overhead rate is calculated based on total overhead costs divided by total direct labour costs. Here, it's $5000 / $20000 = 0.25 or 25%. For Client #234, direct labour costs are 200 hours at $15 per hour, totalling $3000. The overhead allocated is 25% of $3000, which is $750.

Lewis and Partners Is a Legal Firm That Measures and Tracks