Kelson Company applies overhead to jobs on the basis of 60% of direct labor cost. If Job 201 shows $27,000 of manufacturing overhead applied, the direct labor cost on the job was: A. $16,200B. $37,800C. $45,000D. $27,000

Option "C" is the correct answer to the following statement.

Explanation:

Given:

Manufacturing overhead = $27,000 (60% of labor cost)

Overhead basis = 60% of labor cost

Direct labor cost = ?

Computation of direct labor cost:

Direct labor cost = Manufacturing overhead * (100/60)

Direct labor cost = $27,000 * (100/60)

Direct labor cost = $27,000 * 1.66666667

Direct labor cost = $45,000