If ABC budgets $340,000 in Overhead for the year and uses direct labor costs tha
ID: 2533018 • Letter: I
Question
If ABC budgets $340,000 in Overhead for the year and uses direct labor costs that are budgeted at $500,000 as the cost driver; then, how much overhead would they allocate to each of the following jobs, given they use a normal costing system?
340000/500000x100= .68
68% of the labor cost
JOB 1
JOB 2
Direct Materials
$800
$2,380
Direct Labor
$3,000
$12,600
Overhead
Do I add direct materials and direct labor for each and overhead is 68% of that?
JOB 1
JOB 2
Direct Materials
$800
$2,380
Direct Labor
$3,000
$12,600
Overhead
Explanation / Answer
Overhead Rate = 340,000/500,000 x 100 = 68%
Job 1 Overhead = Direct Labor x 68% = 3,000 x 68% = $2,040
Job 2 Overhead = Direct Labor x 68% = 12,600 x 68% = $8,568