Business FinancesQuestion 1181 of 1605
A contractor's annual overhead is $75,000 and projected direct costs are $500,000. On a job with $20,000 direct cost, how much overhead should be allocated using the cost-based method?
a.$1,500
b.$4,000
c.$3,000
d.$2,000
Explanation
Overhead rate = $75,000 / $500,000 = 15%. Overhead allocated to this job = $20,000 x 15% = $3,000. This is added to direct cost before applying profit.
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