Question

An advertising agency is estimating costs for advertising a music festival. The job will require 200 direct labor hours at a cost of \(50 per hour. Overhead costs are applied at a rate of \)65 per direct labor hour. What is the total estimated cost for this job?

Short answer

The total cost for this job is$23,000.

Step-by-step solution

Definition of Direct Labor

Direct labor costs are incurred by the business related to the employees directly engaged in the production activities. Direct labor cost is included while calculating the cost of goods sold.

Total cost of this job

Particular	Amount $
Direct labor$(\mathbf{200}\mathbf{\times }\mathbf{\$}\mathbf{50})$	$10,000
Overhead cost$\mathbf{(}\mathbf{200}\mathbf{\times }\mathbf{\$}\mathbf{65}\mathbf{)}$	13,000
Total cost	$23,000