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12 September, 14:23

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?

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  1. 12 September, 16:08
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    Total job cost = $2,355

    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
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