A Company Has an Overhead Application Rate of 125% of Direct

question 37

Multiple Choice

A company has an overhead application rate of 125% of direct labor costs.How much overhead would be allocated to a job if it required direct labor costing $20,000?

• A)$5,000.
• B)$16,000.
• C)$25,000.
• D)$125,000.
• E)$250,000.

---

Definitions:

Market Price

The prevailing market price for buying or selling an asset or service currently.

Marginal Decision Rule

A principle in economics used to determine the optimal level of an activity; actions should be taken up to the point where marginal benefits equal marginal costs.

Marginal Revenue

Increment in income from the sale of one more product or service unit.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, often indicating the degree of profitability.