Dexter Accounting expects its accountants to work for 24,000 direct labor hours per year. Dexter's estimated total indirect costs are $240,000. The direct labor rate is $75 per hour. Direct labor hours is the allocation base for indirect costs. If Dexter does a job requiring 40 hours of direct labor, what is the total job cost?

Question

Quizplus · Accepted Answer

First, we need to determine the predetermined indirect cost rate:

Predetermined indirect cost rate = Total indirect costs / Estimated direct labor hours
Predetermined indirect cost rate = $240,000 / 24,000 = $10 per direct labor hour

Now, we can calculate the total indirect cost for the job:

Total indirect cost = Predetermined indirect cost rate x Direct labor hours used on the job
Total indirect cost = $10 x 40 = $400

Finally, we can calculate the total job cost:

Total job cost = Direct materials + Direct labor + Total indirect cost
Total job cost = 0 + ($75 per hour x 40 hours) + $400
Total job cost = $3,400

Dexter Accounting Expects Its Accountants to Work for 24,000 Direct