Question

Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the...

Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 65,000 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated $487,500 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was $505,700 and its actual total direct labor was 70,900 hours.

Required:

1. Compute the predetermined overhead rate.

2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job:

Direct materials $ 49,200
Direct labor cost $ 24,900
Direct labor hours worked 260

Compute the total job cost for the Xavier Company engagement.

Homework Answers

Answer #1
Ans. 1 Predetermined overhead rate = Total Estimated overhead cost / Estimated labor hours
$520,000 / 65,000
$8.00 per labor - hour
*Calculations:
*Variable manufacturing overhead = Variable manufacturing overhead per labor hour * Budgted labor hours
$0.50 * 65,000
$32,500
*Total estimated overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead
$32,500 + $487,500
$520,000
Ans. 2 Particulars Amount
Direct materials $49,200
Direct labor cost $24,900
Overhead applied $2,080
Total Job Cost $76,180
*Calculations:
*Overhead cost applied = Predetermined overhead rate * Actual direct labor hours
$8 * 260
$2,080
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