Overhead is applied at 72% of direct labor cost. If direct labor charged to the job is $63,500, how much overhead is applied?
Correct Answer
D) $45,720
Applied overhead is direct labor multiplied by the overhead rate.
Why This Is the Correct Answer
Applied overhead is direct labor multiplied by the overhead rate.
Why the Other Options Are Wrong
Option A: $39,780
$39,780 is below the supported result for applied overhead; it likely uses the wrong base, period, or account bucket.
Option B: $42,320
$42,320 is below the supported result for applied overhead; it likely uses the wrong base, period, or account bucket.
Option C: $44,000
$44,000 is below the supported result for applied overhead; it likely uses the wrong base, period, or account bucket.
Memory Technique
Labor and multiplied live in different drawers; Bookkeeper Loading 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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