Jacson Corp

Jacson Corp. was undecided whether to use labor hours or labor cost in establishing the annual overhead rate. Labor costs are prone to fluctuate based on new hires, raises, retirements, and resignations. They decided to compute both rates for comparison. The overhead costs for the year were estimated at $525,000 with expected direct labor hours of 35,000 and indirect labor hours of 15,000. Direct and indirect labor costs are estimated to be $420,000 and $210,000 respectively. The overhead application rate for both bases (labor hours, labor cost) would be:

A) $12 per hour; 80% of labor cost.
B) $10.50 per hour; 83.3% of labor cost.
C) $15 per hour; 125% of labor cost.
D) $12.60 per hour; 120% of labor cost.