Job Cost Calculation Using Absorption Costing

Steps:

• Direct labor cost: 6 hours × $20/hour =$120
• Overhead absorption rate: $20,000 budgeted overheads ÷ 2,000 budgeted hours =$10 per direct labor hour
• Job overheads: 6 hours × $10/hour =$60
• Total cost: $45 (materials) +$120 (labor) + $60 (overheads) =$225

Why D is correct:

• Absorption costing requires adding direct materials, direct labor, and overheads absorbed at the predetermined rate based on labor hours, totaling $225.

Why the others are wrong:

• A. $105: Includes only materials and overheads, omitting labor cost.
• B. $165: Includes only materials and labor, omitting overheads.
• C. $180: Likely miscalculates overhead rate or adds incorrect labor hours.

Final answer: D