Business FinancesQuestion 299 of 1605
A contractor's annual overhead is $120,000 and the company expects $600,000 in direct job costs for the year. What overhead rate, as a percentage of direct costs, should be applied to each job?
a.10%
b.20%
c.25%
d.50%
Explanation
Overhead rate = Total Overhead ÷ Total Direct Costs = $120,000 ÷ $600,000 = 20%. Each job is then loaded with 20% of its direct costs to recover overhead.
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