Neptune Accounting Services expects its accountants to work 26,000 direct labor hours per year. The company's estimated total indirect costs are $239,000. The direct labor rate is $75 per hour. The company uses direct labor hours as the allocation base for indirect costs.

If Neptune performs a job requiring 20 hours of direct labor, what is the total job cost?

A. $1,500

B. $184

C. $239,000

D. $1,684

The correct answer is D.

Explanation:

Giving the following information:

Neptune Accounting Services expects its accountants to work 26,000 direct labor hours per year. The company's estimated total indirect costs are $239,000. The direct labor rate is $75 per hour. The company uses direct labor hours as the allocation base for indirect costs.

Neptune performs a job requiring 20 hours of direct labor.

First, we need to calculate the overhead rate:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 239,000/26,000 = $9.19 per direct labor hour.

Total cost = 75*20 + 20*9.19 = $1,684