Marty's Metal Shop uses a job order cost system.It applies overhead to jobs at a rate of 175% of direct labor costs.Job No.2617 required $800 in direct labor costs.The job was initially budgeted to require $850 in direct labor costs.Overhead applied to Job No.2617 during the period amounted to:
A)$850.
B)$1,400.
C)$1,275.
D)Some other amount.

Question

Quizplus · Accepted Answer

The overhead rate is 175% of direct labor costs. Therefore, overhead applied to Job No.2617 would be:
$800 direct labor costs x 175% = $1,400
The fact that the job was initially budgeted for $850 does not impact the overhead applied.

Marty's Metal Shop Uses a Job Order Cost System