Managerial Accounting: Tech Solutions is a consulting firm that uses a job-order

Question

Managerial Accounting:

Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm's direct labor includes salaries of consultants that work at the client's job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 77,500 direct labor-hours would be required for the period's estimated level of client service. The company also estimated $775,000 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 $789,800 and its actual total direct labor was 83.350 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 Direct labor cost Direct labor hours worked $ 52,95e $30,500 320 Compute the total job cost for the Xavier Company engagement

Explanation / Answer

Answer =1 CACLULATION OF PREDETERMINED OVERHEAD RATE: Predertermined Overhead allocation rate = Estimated Fixed Overhead Cost "/" Estimated Direct Labour Hours   "=" Predetermined OH Rate Predertermined Overhead allocation rate = $                    7,75,000 "/" $                    77,500 "=" $                     10.00 Answer =2 CALCULATION OF THE TOTAL COST OF THE JOB PARTICLUARS AMOUNT Direct Material $                       52,950 Direct Labour $                       30,500 Overheads: Fixed Overhead (320 Hrs X $ 10 Per Hours) $                          3,200 Variable Overhead (320 X $ 0.50) $                             160 Total Cost $                       86,810 Answer = $ 86,810

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