Business FinancesQuestion 1111 of 1605
A contractor's annual overhead is $120,000 and he expects $600,000 in direct job costs this year. What overhead rate should he add to each job's direct cost to recover overhead?
a.25%
b.12%
c.5%
d.20%
Explanation
Overhead recovery rate = annual overhead / annual direct costs = $120,000 / $600,000 = 0.20 = 20%. He adds 20% of each job's direct cost to cover overhead, then adds profit on top.
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