Question

Bramble Accountant CPAs, LLC is a service firm and applies overhead based upon direct labor cost. For the year 2025, the actual overhead cost incurred totaled $87500. Bramble Accountant CPAs, LLC had underapplied overhead cost of $35000. The company utilized an overhead application rate of 50% of direct labor cost. What was the total direct labor cost incurred for the year?

1) $26250
2) $87500
3) $105000
4) $52500

Answer 1

The total direct labor cost incurred for the year 2025 is $175,000.

Step-by-step explanation:

To calculate the total direct labor cost incurred for the year 2025, we need to use the overhead application rate of 50% of direct labor cost.

We are given that the underapplied overhead cost is $35,000 and the actual overhead cost incurred is $87,500. Underapplied overhead cost means that the applied overhead is less than the actual overhead cost.

To find the total direct labor cost, we can use the formula:

Total Direct Labor Cost = Actual Overhead Cost / Overhead Application Rate

Substituting the given values:

Total Direct Labor Cost = $87,500 / 0.5 = $175,000

Therefore, the total direct labor cost incurred for the year 2025 is $175,000.