Final answer:
Without the direct labor cost value, it's not possible to calculate the total overhead cost from the given information. However, 'spreading the overhead' refers to the decrease in average fixed cost as output increases.
Step-by-step explanation:
The subject of this question revolves around the application of overhead cost based on direct labor cost at a specified rate. To calculate the total overhead incurred by the company, we would need the total direct labor cost. Unfortunately, the provided information does not include the direct labor cost so we cannot calculate the total overhead cost with the given rate of 80%. The question appears to be missing the necessary data to complete the calculation.
Looking at the other information provided on spreading the overhead and average fixed cost, we can delve into a related concept. When fixed costs are divided by the quantity of output produced, it results in the average fixed cost. The average fixed cost curve traditionally is a downward-sloping curve because as output increases, the fixed cost is spread over more units, lowering the cost per unit. This illustrates the concept of spreading the overhead, which refers to the distribution of fixed costs over a larger number of units, leading to a reduction in the cost per unit of output.