A contractor's annual overhead is $480,000 and annual revenue is $2,400,000. For a project with $150,000 direct costs, what overhead amount should be allocated?
Correct Answer
D) $30,000
Overhead rate = $480,000 ÷ $2,400,000 = 20%. Project overhead allocation = $150,000 × 20% = $30,000.
Why This Is the Correct Answer
Overhead rate = $480,000 ÷ $2,400,000 = 20%. Project overhead allocation = $150,000 × 20% = $30,000.
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