A Gainesville contractor applies overhead to jobs at 65% of direct labor cost. If direct labor charged to a job is $48,000, how much overhead is applied?
Correct Answer
B) $31,200
Applied overhead equals direct labor multiplied by the overhead rate, or $31,200.
Why This Is the Correct Answer
Applied overhead equals direct labor multiplied by the overhead rate, or $31,200.
Why the Other Options Are Wrong
Option A: $29,700
$29,700 is below the supported result for applied overhead; it likely uses the wrong base, period, or account bucket.
Option C: $33,600
$33,600 is above the supported result for applied overhead; it likely adds an unsupported amount or compares the wrong financial base.
Option D: $36,000
$36,000 is above the supported result for applied overhead; it likely adds an unsupported amount or compares the wrong financial base.
Memory Technique
Labor and multiplied live in different drawers; Posting Monthly tells which opens.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Two, Accounting for Costs and Expenses, Accounting for Overhead; use the job ledger figures in the stem and recompute the same accounting measure.
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