Question

Neptune Accounting Services expects its accountants to work for 26 comma 000 direct labor hours per year. The​ company's estimated total indirect costs are $ 221 comma 000. The direct labor rate is $ 70 per hour. The company uses direct labor hours as the allocation base for indirect costs. If Neptune performs a job requiring 30 hours of direct​ labor, what is the total job​ cost?

Answer 1

Total job cost =$2,355

Step-by-step explanation:

The overheads would be charged to the job using an overhead absorption rate determined using the labour hours.

The overhead absorption rate = Estimated overhead/Estimated labour hours

=$221,000/26,000 hours

=$8.5 per hour

Total cost of jobs = Direct labour cost + Indirect coat

= ($70 ×30)+ (8.5× 30)

=$2,355