Exotic Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows:
Engine parts | $715,100 | |
Shop direct labor | 522,000 | |
Shop and repair equipment depreciation | 36,000 | |
Shop supervisor salaries | 100,100 | |
Shop property taxes | 18,200 | |
Shop supplies | 13,900 | |
Advertising expense | 14,300 | |
Administrative office salaries | 61,500 | |
Administrative office depreciation expense | 7,900 | |
Total costs and expenses | $1,489,000 |
The average shop direct labor rate is $18.00 per hour.
Determine the predetermined shop overhead rate per direct labor hour. Round the answer to nearest whole cent.
Answer:
Shop Direct Labor Cost = $522,000
Shop Direct Labor Rate = $18
Shop Direct Labor Hours = Shop Direct Labor Cost / Shop Direct
Labor Rate
Shop Direct Labor Hours = $522,000 / $18
Shop Direct Labor Hours = 29,000
Shop Overhead = Shop and repair equipment depreciation + Shop
supervisor salaries + Shop property taxes + Shop supplies
Shop Overhead = $36,000 + $100,100 + $18,200 + $13,900
Shop Overhead = $168,200
Predetermined Overhead Rate per Direct Labor hour = Shop
Overhead /Shop direct labor hours
Predetermined Overhead Rate per Direct Labor hour = $168,200 /
29,000
Predetermined Overhead Rate per Direct Labor hour =
$5.8
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