A construction company has direct labor costs of $85,000, direct materials of $120,000, and overhead costs of $45,000 for a project. What is the total job cost?
Correct Answer
A) $250,000
Total job cost = Direct labor ($85,000) + Direct materials ($120,000) + Overhead ($45,000) = $250,000
Why This Is the Correct Answer
Option B is correct because total job cost includes all three components of project costs: direct labor ($85,000), direct materials ($120,000), and overhead costs ($45,000). Adding these together: $85,000 + $120,000 + $45,000 = $250,000. This represents the complete cost accounting for a construction project, including all direct and indirect expenses necessary to complete the work.
Why the Other Options Are Wrong
Option B: $165,000
Option C ($165,000) is incorrect because it only includes direct labor ($85,000) and overhead costs ($45,000), totaling $110,000, or possibly direct materials ($120,000) and overhead ($45,000). Either way, it omits a major cost component and significantly underestimates the total project cost.
Option D: $230,000
Option D ($230,000) is incorrect because it appears to be missing $20,000 from the total calculation. This could result from a mathematical error or potentially omitting a portion of one of the cost categories, but doesn't represent the complete sum of all three cost components.
Memory Technique
Remember 'DLM-O': Direct Labor + Materials + Overhead = Total job cost. Think 'DLMO' like 'DEMO' - you need all components to demonstrate the complete project cost.
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