The Engineering Firm of Dobbs and Smith Uses a Job

question 16

Multiple Choice

The engineering firm of Dobbs and Smith uses a job order costing system to accumulate client-related costs. The overhead rate is 60% of direct labor cost. Staff engineer time is charged at a rate of $80 per hour. A recent job for a client involved 30 staff labor hours. How much was the total job cost?

• A) $1,600
• B) $2,400
• C) $3,840
• D) $360

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Definitions:

Goal Congruence

A condition in which the goals of the organization's different members or departments align and support the overall objectives of the organization.

Perfect Competition

An ideal market scenario in which there are many buyers and sellers, homogeneous products, and no barriers to entry or exit.

Transfer Pricing Formula

A method used to determine the price at which goods and services are sold between divisions within the same company.

Variable Cost

Costs that vary in total in direct proportion to changes in the level of activity or volume of output produced.